City Council - workshop

I think he's going to actually run late.

Oh, okay. I want to start now. Gotcha. Thank you. Let's call the workshop to order. Roll call, please.

Council Member Daugherty is absent. Council Member Woods. Here. Council Member McKenzie.

Here.

Council Member Schwerer is absent. Mayor Monge.

Here. Thank you very much. May I have a motion to adopt agenda? So moved. So moved. Council Member McKenzie. Second. Second. Council Member Woods. All those in favor say aye. Aye. Aye.

Thank you, Mayor. We have one topic up this evening for the workshop, and that is the 2027 non-levy budgets and the 2027 to 2036 CIP. Dan's been really excited about this night, so I'm going to turn it over to our finance director, Dan Winnick.

Well, not really. You know. No, thank you, Mayor, Councilmembers. Last time we met, we went over the levy budgets. Tonight, we'll go over the non-levy budgets in the CIP. We will not be going into the CIP in great detail, so there's some questions for you at the end of this presentation. in addition to your normal questions that you will be asking, it really wants some direction on how deep we want to go into the capital improvement plan itself so we can schedule another meeting. If you would like to have other department heads there and so forth, we'll kind of touch base on to that. Right now we're kind of looking at the schedule is that the next EDA meeting will be September 8th. So I will be there to share the budget information with them, get their approval onto that. And then September 15th, we'll be back to certify our maximum levy. It doesn't mean that we can't still have discussions about the budget and everything else. We certainly can. We just can't go above whatever we certify. We can go down, but we can't go up, and we don't approve the final budget until sometime in December. Also, on the 15th, we'll set the truth in taxation date and time and location and so forth, part of protocol regarding the budget. So tonight kind of our agenda is going to be, we're going to kind of go over one more time, just to familiarize the city council with what budgets that the city council approves. We'll take a look at the 2027 enterprise fund budgets, the 2027 internal service fund budgets, and then we have some special revenue, our other budgets, just a few of those. Then we'll just, at a high level, we'll look at the 2027-2036 capital improvement plan. I also have included the 10-year financial plans in this that will quickly go through. And then we'll revisit the 2027 proposed levy, if you remember when we went to the levy. The suggestion at that point in time was to be able to hit that 6% levy was to take $40,000, reduce the levy for Economic Development Authority, EDA, by $40,000. There was some discussion that we should come back with a different option, so I have an option to propose to city council tonight. and then open it up for any questions and answers and have a discussion. Again, you can stop me at any time through the presentation for clarification or if you have questions that come up.

Sounds good, thank you.

So again, the levy budgets, which we have already gone over, are the general fund, the Housing Redevelopment Authority, the Economic Development Authority, the Park Fund, Street Maintenance Fund, and the Asset Preservation Fund. The enterprise funds we will be going over tonight are the water fund, waste water fund, electric fund, surface water fund, solid waste fund, and the mayor's favorite, fiber optic fund. Internal service funds. Internal service funds, the charges and the revenue come from our other departments for services that are provided to them through these different funds. And they're including the information technology internal service fund, the insurance equipment, city mechanic, and the building maintenance. And then we'll cover, we just have three other permanent special revenue funds, community center, community event, and then the fire relief fund. So enterprise funds, the first one in kind of a high level summary. To remind, I did attach all budgets, line item details with this packet, and in addition, the whole complete capital improvement plan is also attached. But for the water fund, For the 2027 proposed budget, we're looking at revenues a little over $2 million, just a slight increase from last year, just below $19,000. That represents a 1% rate increase. And as we go through looking at the financial plans, and I'll explain those a little bit more, I do also have a summary of what will potentially have a need for a rate increase. And then the budget's just a little over $1.9 million. Right now, the way the proposed budget is presented, it would increase our fund balance $142,000. A WASTEWATER FUND, WE HAVE REVENUES OF JUST SHORT OF $2.8 MILLION. IT'S OVER A $100,000 INCREASE. THIS ONE WOULD, THAT INCREASE INCLUDES A 3.25% RATE INCREASE. THE BUDGET'S JUST BELOW $2.3 MILLION. THAT'S A DECREASE OF $300,000, A LITTLE LESS THAN $300,000. REALLY, IT'S FROM THE CAPITAL. where you're going to see that decrease. The rest of the line items are pretty much where they were in 2026. Fund balance on this would increase just under $500,000. The electric fund has a revenue of just below $12 million. That's an increase of $160,000 from 2026. The budget of just over 12 million, an increase of a half a million dollars from 2026. And the fund balance would decrease approximately $86,000. There is no rate proposed for 2027 in the electric fund. Surface Water Fund has revenues of about $1.1 million. That's an $80,000 increase from 2026. Basically, that's due to the 5.25% rate increase. When you think of a 5.25% rate increase, you think, well, that's a pretty hefty INCREASE. IT ONLY GENERATES $80,000. WHAT YOU'RE GOING TO SEE RIGHT NOW, THERE'S THREE UTILITY FUNDS THAT HAVE RATE SUGGESTIONS OR RATE REQUESTS OF INCREASES. AND SO FAR YOU'VE SEEN THE WATER, WASTE WATER, AND SERVICE WATER. THE COMMONALITY AND WHAT THE DRIVING FACTOR IS TO WHY THOSE ARE BEING INCREASED IS BECAUSE OF YOUR STREET PROJECTS. EVERY TIME YOU DO A STREET PROJECT, THERE'S THE STREET COMPONENT OF IT, WHICH COMES FROM YOUR GENERAL FUND OR BONDING. and then you have the water, wastewater, and surface water. Again, depending on if we're doing a preservation project or we're doing a reconstruction, it'll be funded from either the fund or from bonds. But even if you do bonds, then you have a debt payment that's gonna be associated with it in the years to come. The budget has decreased $841,000, over $400,000 of that budget decrease. I'm sorry, it's a $800,000 budget. It's decreased about $367,000. The majority of that is all due to the fluctuations of capital needs that are based upon the capital improvement plan. This would increase the fund balance about $260,000. Solid waste fund has revenues about 1.1 million. It's a $26,000 increase from 26. The budget's about $1,150,000. It's a decrease of about 123 from 2026. And right now, this would decrease the fund balance about $47,000. Again, no rate increase in the solid waste. THE BIG COMPONENT TO WHY THE BUDGET HAS DECREASED IS DUE TO THE RFP THAT WE DID FOR THE GARBAGE HAULER. AND WE GOT SOME REALLY, REALLY GOOD RATES FROM THAT. BUT SOME OF THAT IS OFFSET BECAUSE OF TIPPING CHARGES. AND TIPPING CHARGES CONTINUOUSLY GO UP. WE PAY THE TIPPING CHARGES THAT COME FROM THE RAMSEY WASHINGTON COUNTY RECYCLING CENTER. THOSE ARE A SIGNIFICANT COMPONENT TO THE BUDGET. Even though it may suggest that we look at some sort of a rate increase in the solid waste, we're not going to do it until we get a little bit more information and historical information to see how this free bulky pickup will play out. Even though it's free to our residents, there is a cost associated with it. Our hauler, Tennis, who got the contract again this year, is providing their labor for free, yet there'll still be associated tipping charges that the city picks up. So depending on how much it's utilized, really don't have a real good handle on what that cost increase could be. So instead of changing a rate at this point in time, just like we've done for a number of years, we still have some fund balance. We'll utilize fund balance until we get a little bit more historical data to make a recommendation on a rate change into the future. And then we have the fiber optic fund. Revenue is just under $200,000. Budget is um... of about a hundred and fourteen thousand uh... it's uh... decrease from sixty or sixty five hundred from twenty twenty six uh... it increases the the fund balance eighty thousand really what it does is it reduces the negative fund balance that's in this fund by $80,000. Any questions with the enterprise funds at this point in time? So you're seeing that there's a request out there for three rate increases. Again, for our enterprise funds, they're all related to the street projects because there is components in the water, wastewater, and the surface water. Internal service funds, we have the information technology. The revenues are the same as they were in 2026 at about $524,000. We have a budget of about $622,000, an increase of about $33,000 from 2025. Again, the driving factor to that increase is Metro INET charges. This would decrease our fund balance about $98,000. The fund balance that we had at the end of last year was approximately $273,000. So we're gonna be buying down some of that fund balance.

So that one in three years, it's gone up over $200,000.

Yeah, I believe since the time I started, it's gone up about 260, 270. It's over doubled from when I started in 2021. I think it was at about 221. It's now somewhere about 460, 470.

Yeah, projected for 27 is looking like 621.

Yeah, there's some other costs that are in there for, you know, purchasing of computers and other things that are in there. So it's not all we'd have to go into the line item detail to see what is actually just the Metro I net charge part to it. And then there's other charges as far as, you know, we have a financial system, we have the park system, so it's software. We have a number of civic clerk, you know, agenda, for the agenda for, I think for, there's a communication one. So this includes all of the software that the city purchases. So that's where you're seeing that $621,000 figure.

I mean, that seems to be something maybe we have to try to focus on this year coming up to just try to get a handle on understanding exactly what we're paying for and seeing where that comes because that just seems to be a budget that's quite a bit.

Are we taking advantage of everything that we're paying for there appropriately?

And I know some cities have, you know, one person that works, you know, for the city that does the run around and do things like that.

You can do a mix and match of things just to kind of understand where we're at so we can feel comfortable because it's quite a... Our city manager, Frandle, has already started looking at that, how we break that apart, whether it would be some sort of a hybrid, certain services that we would retain that may be, you know, the... Internet connectivity, the security component to it, but maybe there's a breakout of either hiring an individual or hiring a company to provide, you know, more or less that day-to-day.

Normal tech support.

Tech support piece to it, right. And, you know, you could hire a company and, you know, part of their agreement would be that there would have to be you know, a two- or three-hour response time if you have some sort of issue. So he's well aware. This is a sticking point for our city manager of all the increases, and so he's already starting to try to gather some of that information.

Perfect. Just to take a look, and you might find out that things are good. You might find out there's a few things we can do.

Absolutely.

Perfect.

Thanks. We have the insurance fund, revenues of about $524,000. That's a decrease of 227 for 2026. Full disclosure, the budget that's in there for, and we will adjust it by city council action at a later date, The revenue that was put in was $751,000. It really should have been $620,000. That's all we're charging for revenues part of this. So we will make a city council action to decrease the estimated revenues of this fund. So it really hasn't gone up that much. It's really gone up probably about, um you know from a comparison or i'm sorry a decrease of of about 96 000 versus the 227. uh the budget of 531 000 is a decrease of about 89 000 from 2026. uh the driving factor here to seeing the decreases um really comes down to our workers cop Insurance has gone down significantly. We had a big spike on that in the last two years. It's been kind of dropping and stabilizing.

Insurance and decrease in the same sentence is good.

It is, absolutely. And so right now it would look for the 2027 budget that there would be a decrease in our fund balance of just $6,800.00. Our equipment fund revenues decrease about $10,000 from 2026 at about $528,000. Per the capital improvement plan, we have scheduled just less than $2.3 million of purchases. The bigger component in there is that ladder truck. THE LATTER TRUCK, I DO HAVE A NOTE ON THERE, WAS APPROVED BY CITY COUNCIL AT THE END OF 2025. IT WAS INCLUDED IN THE 2026 BUDGET. THE REALITY TO IT IS, ACCORDING TO OUR FIRE CHIEF JASON MELLINGER, THAT WE WON'T EXPEND ANY OF THAT UNTIL IT'S DONE, AND IT WON'T BE DONE UNTIL 2027. SO I PUT IT IN THE 2027 BUDGET. IT IS REFLECTED IN THE 26, BUT IT'S NOT REALLY GOING TO BE EXPENDED IN THE 26 BUDGET. And then this would be a decrease of about $1.7 million in our fund balance. Fund balance at the end of last year was $3.6 million. City mechanic budget, revenues of about $44,000, same as 2026. The budget has increased to just under $60,000. At this point in time, when we were building the budget, not knowing what the city mechanic would be in some of these internal service funds, and to achieve that 6% levy, we kept the revenues the same. We will end up having to adjust them in future years. because the budget is going up. We have a very good mechanic who is doing a very thorough job on our vehicles and does things in a little different manner than have been done in the past. What does that mean? not contracting out a lot of the work. He's actually doing a lot of the work himself, which requires more supplies. Excellent, excellent job he's doing. So it does reflect an increase of a little over 15,000 in 2026. This would decrease our fund balance about that $15,000. We do have just a small fund balance at the end of last year, about $46,000. That's why we can't live off of that forever. That's why we will end up next in 2028 adjusting the rate that we charge other departments. The building maintenance budget has revenues a little over half a million dollars. Just an increase of a little over $2,000 from 2026. Our budget's $444,000. It's an increase of about $13,500 from 2026. This would increase our fund balance $59,000. Our fund balance at the end of last year was $523,000. You can see I've shown you the fund balances in the past. Those have increased. We're doing a pretty good job with the exception of the mechanic fund. And you're going to see the community event fund coming up here in just a couple of slides. And I think there's one more that... that we needed to kind of be aware of, oh, I'm sorry, the solid waste. And that's, you know, we'll play that out even though we are projecting a negativity to that we want to project out and find out how that bulky pickup is going to play out for us before we make any adjustments to our residents. Other budgets that we do, traditionally we've had the community center fund. As of right now, we have no budget for the 2027 because we hopefully will have that property sold and we won't be responsible for any costs that are associated with that. And then there's the community event fund and that has revenues of just below $14,000, just a $405 decrease from 2026. AS A BUDGET OF ABOUT $34,000, THAT'S AN INCREASE OF ABOUT $4,500 FOR 2026. IT'S A DECREASE IN OUR FUND VALANCE OF ABOUT $20,000. OUR FUND VALANCE AT THE END OF THE YEAR WAS $52,000. SO YOU CAN SEE THAT THAT WILL NEED TO BE ADJUSTED IN THE 2028 BUDGET COMPONENT TO IT. primarily with the community event fund is it pays for all the costs associated with what Ava does and all of the wonderful community events that she plans and does an absolutely fabulous job. And then it's costs that are associated with the car show come out of this fund. And then there's the Fire Relief Fund, and traditionally what this fund has been used for is basically the revenues and the budget, it's a pass-through. We receive fire aid from the state of Minnesota, and we end up having to transfer. We may not need this budget in 2027, still looking into it a little bit. where city council had approved that the fire relief is no longer its own association. It's now part of the Minnesota State PERA. And I haven't gotten confirmation, but I believe that the payments will go directly to PERA versus coming to the city, and then we would actually give it to the Fire Relief Association. So I think we're no longer the middle person on this, which would say we don't need to have a fire relief fund, but we'll know a little bit more. Any questions with our internal service funds or our special revenue funds that we have?

Well, that fire fund then, is that what the part-timers get? Is that their base pay at the end of a season and that, or how they get paid for each call, or how is that?

It's their pension. Pension. Yeah. So there's a set dollar amount. I think right now it's set at for every year of service, they get $7,100 put into kind of a pot. And after, I'm not going to know the exact amount. I think after 20 years, they get 100% of that. Back, if it's after five years, I think it's 40, it ratchets up. I think after 10 years, it's like 60% until they're fully vested into the plan.

What's their full investment and how many years of service? I think it's 20 right now. So if they were only a firefighter part-timer for 10 years, they would not draw out of it then?

They would get a percentage.

A percentage?

Yeah, not 100%. Okay. So, and the Fire Relief Association has done a fantastic job of investing those funds throughout the years until they made the decision to turn this over to the state of Minnesota. The capital improvement plan, just gonna add a very high level. So you can see the different funding sources. We have the asset preservation, the street fund, we have bonding for streets, we have park dedication fund, bonding for water, water fund, bonding for wastewater, wastewater fund, electric fund, bonding for surface water and surface water fund, park fund, equipment fund, and then grant funding. The grant funding that's being identified here, the majority of it is the excellent work that the city has done. in getting the allocation of the state's grant that was gonna go to the community center, moved over to the water tower. And so I've got a slide here in a little bit to show you what impact that had as far as a rate increase, and it's significant. So from a financial position, that was one huge, huge move for the city in putting it into a much better financial position. As you see, over the 10-year period, there's $101 million worth of work or equipment to be purchased. The bigger driving factors onto that is our streets. Not cheap to do street work. And so there's a combination of bonds because we're on a cycle of every other year we do bonding and every other year we, in the year we don't do bonding, we do a street preservation program, which we're doing this year. Next year in 2027, we would go out and do a bonding. So that's kind of a high level of that. Again, like I've shown in the past, this is really our driver. That capital improvement plan is what really drives our levy increases. And right now, streets and street debt at about $173,000 is what we're contributing. You have an increase in levy, which is a little over 2%. Parks, $76,000, which is 0.89% of our levy. And then the asset preservation, which takes care of our facilities of 142,000, which is a 1.65% of levy increase from 2026. Total just under $400,000 or a 4.55% levy increase. So that's where we're at for starting levy when we look for building the next year's budget. Now we're at 4.55% levy increase. I've attached 10-year financial plans. I am going to pull these up in a spreadsheet so hopefully you can see them a little bit better. If I can figure out how to do that. I think we've got it up. I don't know if it's going to show a little bit better here. Probably not. So for the water fund, so all of these 10-year financial pictures, there's a lot of assumptions that we make. We make assumptions on what we think our annual increase in our expenditures will be, usually using about a 3.5% increase. Looking at things, then we can adjust our revenue based upon what we should be changing our rate. At the end of the day, the very bottom line is an over and under our target working capital. And that number in the 10th year really needs to be close to a zero or thereabouts. The financial plans are looked at it two different ways, from fund balance and cash. And cash is more of a true reflection of what you really have to be able to purchase things. And as you can see here in the water fund, that there would be 1% increases. Now, this gets adjusted every single year based upon how we perform. So, you know, the 2025 actuals are in. We perform better, and you've seen that information. Then we anticipate it from a budgetary standpoint. So then it reduces our need. The bigger driving factor here is that in the capital line, there isn't that $4.5 million expenditure coming out of the water fund. And that again is due to the switching of the grant from the community center to the water fund, which has a significant impact on what we would have had to ask for water fund rate increases. The wastewater, same thing. That one is looking at about a 3.25% rate increase. Again, we're looking at expenditures using that 3.5%. Electric should not need a rate increase for 27, 28, 29. And then based upon that performance, it may even go longer than that. But right now with what we have, we'd be looking at in the range of about a 2%. Again, there's so many variables that play into this. We're utilizing about a 2.25% increase from MMPA. If it were to go a lot higher than that, obviously it would push the rate increase up sooner. If it doesn't go up and we perform better, then we can lower that number down.

Thank you.

And then surface water, that's the one that's at that 5.25%. And unfortunately, there just isn't a lot of revenue that's in there. You know, it's about a $1.1 million budget. You know, 5.25% increase is only generating, you know, $60,000 in revenue. Yet this one gets hit quite significantly by street projects. Part of what we ended up seeing of, with Casey Lake Pond. It's the runoff water in a project that ends up coming from the surface water component to it. And then our solid waste, right now we're going to hold it, our rate's the same for 2027, but there is a potential that as the contract has rate increases of 3% that we may end up having to have a rate increase of about 3, 3.5% range. But again, let's play it out a little bit and see how the bulky pickup has an impact. Council Member Nordby, I had said earlier about the BULKY PICKUP THAT THERE STILL IS A COST ASSOCIATED WITH THAT FOR THE CITY IT'S FREE TO OUR RESIDENTS THE THE SIX ACCEPTABLE BULKY PICKUP ITEMS AND THEN TWO ACCEPTABLE APPLIANCES THE LABOR IS NOT BEING CHARGED BY TENES YET THERE'S GOING TO BE TIPPING CHARGES THAT WOULD BE ASSOCIATED AND PART PART OF OUR CONTRACT AND WE'VE ALWAYS HAD IT THAT WAY WE PAY THOSE TIPPING CHARGES So we just want to play it out to see how it's going to go before doing any rate increase. And so we'll use some fund balance to cover us through the 2027. And then fiber optics, there's not a lot to say about it. It's a negative fund balance. It's going to take many years to get back, if ever. because we do have some contracts from some cities that prepaid that will be coming up in about six, seven years. So whether they will continue to use our fiber, that's a question to be determined. But... And then we have the equipment fund.

One thing when it comes to that, is there any equipment that we need to upgrade? Is there stuff that has to happen with the fiber? Is there the backbone? Is there anything that we or somebody else take care of that? Don't cry, it's just fiber. You go ahead. It's fine. We're good. I'm not sure. He'll tell us later.

We can go on to something. In my time here, we haven't paid any additional costs onto it.

Sometimes, you know, the switches get old and different things like that. Yeah, absolutely. You know, you got to do some kind of a cleanup. Yeah. Okay.

So I'm unaware of that.

When they move from the community center over to the public works, will they be upgrading any of the connections in there?

That, again, I don't know. I do know that that would be at our cost.

Yeah, there's not going to be anything in the building just going to be a splice in the street now. So all that equipment that's in that community center won't be there anymore. It's just going to be splices.

Yeah, I believe that's correct, yeah.

So that will get rid of stuff.

And then we have the equipment fund and we're not anticipating any rate increases 27 28 29 Again, it's an internal charge that we do for the equipment And then after that we'd be looking at about a 5% based upon the capital improvement plan and the needs for equipment replacement Building an asset preservation fund I Again, how this is built right now is to keeping that levy increase every year of $142,000. That would cover what's in the capital improvement plan. There's one year in there that's 2031 that we would have a negative amount THAT WILL BE SOMETHING THAT WE'LL HAVE TO LOOK AT AND ADJUST WHAT WE'RE EXPENDING SO WE DON'T GO INTO A NEGATIVE COMPONENT. THAT HAS NOT BEEN PUT ON IN THESE PLANS. PLANS ARE REALLY TO DETERMINE IF THERE'S RATE INCREASES, HOW MUCH OF A RATE INCREASE AND SO FORTH. BUT OBVIOUSLY WHEN 2031 COMES AROUND, WE WOULDN'T DO WHAT'S BEING SAID IN THIS PLAN. PARK DEDICATION FUND IS PRETTY STAGNANT FUND. only get money on newer developments. They have a fund balance of about $471,000, part of their CIP that they would need in 2029 per the capital improvement plan, about $450,000. It doesn't leave them much. It doesn't generate a great amount of revenue. As you can see, in 23, it was about a little over $23,000. 2024 was $184,000, a big component of that. Two pieces, one brought it to city council. We got the funds from the Sentinel development and then from, I call it the Lilly development, article number seven. And then outside of that, we just get some smaller amounts. In 2025, we receive about 20,000. So you probably can really only anticipate about 20,000 or less that we're going to get from park dedication funds. And then the park fund. Currently, we're increasing the revenue about $76,000 a year. If we look on that based upon what their current requests are, they would run into a negative balance in 2030. So that means we need to adjust that plan from 2030 and on. But at the end of the 10-year plan, they would end up having a positive fund balance over our target. So again, there's some work that needs to be done, part of this plan component to it. i think it was pretty loud and clear last year we had a workshop not all of the council members were in attendance but we kind of talked about did we keep chasing after and raising that levy for the infrastructural components and the answer was pretty much no that we needed to start prioritizing within what we were levying And so that's kind of the direction that we're looking at. So, again, we would end up having to adjust our plans to be affordable underneath what we are levying piece to it. And then we have the street maintenance fund, and that covers a lot of ground, a lot of expenditures that are in there. You can see in the capital improvement plan, so that's where we're going to be paying. Debt comes out of there from the bonding components to it. It's all the capital plans that are out there on that. Every other year we have that fund. PRESERVATION PLAN THAT WE DO. AND THOSE ARE SIGNIFICANT DOLLARS THAT WE'RE PUTTING IN THERE. I AM GOING TO ASK RON RITCHIE TO COME UP HERE AND SPEAK FOR A SECOND BECAUSE IN OUR DEPARTMENT HEAD MEETING TODAY BRIAN SAID THAT RON WAS SUPPOSED TO PRESENT THIS TODAY. SO I AM GOING TO PUT HIM ON THE SPOT RIGHT NOW. BECAUSE THERE WAS SOMETHING THAT OUR CITY MANAGER, BRIAN FRANDEL, MYSELF, AND RON WERE HAVING A CONVERSATION, AND I KIND OF WANTED FOR HIM TO KIND OF SAY IT OF WHAT IS HIS PERSPECTIVE ON HOW THAT ASSET PRESERVATION OR THAT PRESERVATION PART OF THE ROAD CONSTRUCTION IS WORKING FOR THE CITY. ARE WE SEEING ANY IMPROVEMENTS? AND HE MADE SOME INTERESTING COMMENTS, BUT I'M GOING TO LET HIM KIND OF TALK ABOUT THAT A LITTLE BIT.

Well, this is putting me on the spot. So yeah, the pavement preservation part of that program is to try to get as much blacktop down as we can on the roads. With our road ratings being where they were when we looked at this from the beginning, just with the money that was being put in there, we would have never got that scale to go upwards. So With this pavement preservation, we are able to get a lot more of the roads covered. We're done patching for the year right now, which it's about a month ahead of schedule where we normally are, and that has a lot to do with that pavement preservation. We probably will get to a point with this pavement preservation where we'll have to start making some decisions on do we cover this up or do we not cover some of these utilities up for doing it. But we are heading in the right direction. Morgan is going to give us an update on our road rating conditions. We do that every year. We rate our roads. So we'll kind of see where our numbers will be at. But we are making a huge difference in our eyes with this. And like I said, it's not the perfect plan, but I think it's a good enough plan to where we can get a lot more roads covered where When residents come out and ask us, hey, when are we going to have a project in our area? And it's not even on the outlook yet. At least something like this program can hopefully put us in some, you know, buy us the time that we're going to need to do the full utility replacements down the road. I don't know if I hit on some of the stuff that you wanted me to or...

No, I think he did an excellent job and it's really the piece that I think is significant that the two pieces, one he didn't say that the finance we'll talk about, but is that our road rating is heading in the right direction. If you remember when that was presented, the way we were doing it was every other year bonding. We weren't taking care of that other component that I THINK IT WAS RANDY, RON AND MORGAN HAD COME UP WITH AND THREW BY AND OUR CITY MANAGER CLEARLY SUPPORTED AND SO DID CITY COUNCIL TO BE ABLE TO DO THIS OTHER COMPONENT TO IT. I think the rating at that time, we were in like the 50s, and it wasn't going to change by doing that every other year. Now I think we're seeing, and I wouldn't be surprised if we're approaching that 70 number coming up pretty soon. And from a peer finance side to it is that we're paying that part in cash. We're not bonding for that every other year. Again, City Council was supportive enough that that's where we had transferred the startup of it two years ago. The $1.1 million to start it up. This year, the fund has accumulated some money and that we're paying it now out of the fund itself, and we should be able to continue to do that into the future. So I think that's pretty significant. And I know Ron just loves when we give him more money because it just means more work for him.

And one thing I'll just say with this pavement preservation program, just for the public out there, when we go out there, we definitely work with or live within our budget when we go out there. So these pavement preservation, it's basically working between the curbs. I know when we start doing these projects and going in there, I think a lot of people really look at it like it's a full project and they don't realize everything that's underground that we're not touching or not covering up or not disturbing. So we get a lot of questions. Hey, why aren't you replacing the sidewalk? Why did you do just 10 feet of curb over there, then you didn't do anything for 100 feet? These roads get measured out many, many different times to try to stay within our budget with what we have to do. I know Dan spoke, there's some utility work that we're doing, or I shouldn't say there's some, in the utility budgets, most of those budgets are for the catch basins, the storm sewer structures, or the manhole structures, that we have out there. We don't do full rebuilds of those unless one of them is totally shot. We try to get ahead of that by planning out a year ahead of time in what we're doing. If there's something we can replace just in a normal maintenance budget that we have, for the next year coming up. So in this year, 26, we're looking ahead to what we might do with our smaller pavement project for next year, which is like 400 and some thousand dollars right around in there, which do some little areas. But I know a lot of people... really question why there's just spotty curb. But the reason there is, is we take the worst of the worst, we kind of grade that whole section that we're doing on a curve, and we take the worst of the worst. Basically what we're looking for is if it affects water drainage is a big thing. If there's some piece of the curbs that are really broken up. There's still maybe some cracks in the curbs that we don't replace, but that is because we could blow the whole budget just on curbs and trying to do that. And The big picture of this is hopefully it's going to buy us 15 years before we have to come and do full replacements up there. If you get questions like that from the council, I'm more than happy to talk to those people, but just so you guys understand, when you go into an area and you see some new curb and some not, a ton of work goes into kind of... Weigh it out. What are we going to replace? And the biggest thing is staying within our budget that we have.

Makes sense. Especially for concrete. We still have some asphalt curbs.

We do. And they get you by, but a plow is off for a little bit, and they're gone.

I'd like to jump in there a little bit. Dan, if you can elaborate, you kind of glazed over, but it's so important, the paying the cash on some of these projects and what kind of funds that we're saving by doing it that way.

Yeah, so in our capital improvement plan, I think this past year we were at about, what, $2.5 million, including streets, water, wastewater, and surface water. So again, if you were to go out and bond that at a 5% interest, which is probably about what you would pay on a 20-year bond, it's $80,000 for 20 years that you'd be paying. So you'd probably be looking at about... $200,000 that you would be paying every year for 20 years, which amounts to 4 million at the end of it versus paying the 2.5 now with the cash. And so that's one of the big parts that we had a discussion here at city council about how do we convert ourselves more over to that cash. management side to it and being able to pay cash instead of all of the debt that we have. I think it was a year ago I brought kind of a comparison that there's a lot of comparison to us in Moundsview. And we've talked about some of the similarities and dissimilarities. And one, that they have much more commercial property than we do. 90 plus of our tax base is residential. That's not the case in Moundsview. But one of the biggest pieces that I had showed, and I actually had asked city council after I showed what the debt, like in... uh what moundsville was carrying in their general fund and then what their their um debt was in their utilities and i'd show you and i think that one of them i don't quote me on this they had like five million dollars of debt in their general fund and then i asked city council what do you think ours is and ours was like 30 million um you know and then we went to the utility and again a significant increase into it so Just like in our budget that we have here today, that's in our levy budget, we have $1.1 million of our levy is to pay debt in our general fund. At $90,000 for every levy increase, if you didn't have that amount, you're looking at, what, a 12, 13% reduction in our levy as a percentage from one year to the next. SO AT THE END OF THE DAY, IF WE CAN MOVE OURSELVES MORE TO A CASH BASIS, ESPECIALLY BECAUSE WE DON'T DO SPECIAL ASSESSMENTS, WHICH I THINK CITY COUNCIL IS IN AGREEMENT WITH, THAT WAS THE DECISION, AND I TOTALLY AM IN AGREEMENT WITH THAT, THAT, YOU KNOW, THIS IS REALLY A REALLY GOOD PLAN, AND, YOU KNOW, THE CREDIT FOR THE PLAN AND FOR THE CREATION OF THE IDEA AND THE IMPLEMENTATION OF IT GOES TO, YOU KNOW, you know, Ron, Randy, and Morgan for coming into this, and they've done just an excellent job. And I think, you know, when Morgan comes with the new rating and see where we're at, hopefully we're going to see that that needle's rising up, and that's really what we want to do for our residents.

Agreed.

Do I owe you something for calling you up here now? No. Do you want to stay up here? Because you never know how I'm going to be. Okay. Thank you very much, Ron. So again, all of our street projects really do have, you know, in our capital component to it, and the capital improvement plan really does impact, you know, our need to do some utility rate changes. If you remember on November 18th of last year, where we were at before we saw the performances of things, and this is how things can change so quickly, we were anticipating that Water Fund would end up needing a 6.25% increase. Now we're down to 1%. And again, that big significant component to it is paying for the water tower not through the fund itself but through the grant fund. So that's how huge that change is on that water rate. WASTEWATER, WE WERE LOOKING AT 6.75% INCREASE LAST YEAR. WE STILL ARE GOING TO REQUIRE AN INCREASE. IT'S NOT AS SIGNIFICANT. IT'S 3.25 STARTING IN 2027. THE ELECTRIC FUND CLEARLY PERFORMED FANTASTIC LAST YEAR. WE WERE LOOKING AT A POTENTIAL OF HAVING TO DO AN INCREASE. NOW WE'RE COMFORTABLE IN SAYING WE'RE NOT GOING TO HAVE A RATE INCREASE FOR THREE YEARS. unless something totally bizarre happens as far as rates that we get from MMPA. Our surface water, that one didn't change a great deal. We were at 6%. We're going to need a 5.25%, and I think kind of explained that before. That's just a tougher one. There's just not as much revenue that that fund generates. And then the solid waste, we're going to hold that steady for the 2027 fund. just from the standpoint that we wanted to wait for the RFP. That hasn't changed. So here's where the current rates are at. And what's included in the budget right now is a water fund increase of 1% on the rate, wastewater 3.25, surface water 5.25. Those are the three rates that would change in 2027. In the past five years, what kind of rate increases have we done? In 22 and 23, we had electric rate increases. We have not had anything in electric rate increases since that time. Wastewater, we saw increases in 23 and 24. and surface water in 24 and 25, and no rate increases in 2026. Again, outside of that water, which was gonna be a big increase, that's kind of gotten off the whole radar. It hasn't had any increases for quite some time. And then you see the other two components, the wastewater and surface water. And again, they're being driven because of the street projects. So we're, you know, like to be able to see no rate increases, but that's just not the reality of the world in which we live in right now. If we're trying to, hey, Brian, I think it's catchy. We're trying to play catch up. um you know um on our road rating and so forth and again um a lot of thanks to uh you know ron randy and morgan coming up with that next plan um because i'll never forget we were actually over in the sandberg room uh when we looked at uh there was a letter and some graphs that morgan had put together on our road rating And to watch city council's face looking at it going, are you serious? We're putting in these bonding and our rating isn't changing. Actually, it was decreasing slightly. And so they came up with a different plan to try to move that needle. And I think it's working. And then we're going to revisit the proposed 2027 levy that we had talked about last time. We're at a 6%. And at that point in time, we were looking at to make that 6% a $40,000 reduction in EDA, Economic Development Authority. There was some discussion on that that kind of said, hey, is there a different way that we could do that? So Brian and I took a hard look, and what we're proposing as an option is to increase our revenue in the general fund for investment income by $25,000, and then to reduce the EDA levy only $15,000 instead of the $40,000. And I think we felt pretty comfortable with that investment income looking in the back, looking in the past and then looking at our bond rating and our bond rates right now are going. So right now they're over that 4% mark for five years. So I think we're feeling very comfortable with that. So question to City Council is, is that the direction you want us to go into? Because again, on September 15th, well, September 8th, I'll be bringing the budget and I will incorporate whatever you want or if you come up with something else that there would be a $15,000 reduction in the EDA and then bring in the EDA's budget and levy to them to get their approval on the 8th. And then the 15th, bring back our levy budgets for certification for the maximum levy.

Would this affect our facade program that we've got going on through the EDA?

I don't believe it does. When we looked at it last time, we had a pretty significant fund balance and cash available in the EDA. And even at the amount, I think we'd be sitting, you know, I think we levy a little over $200,000. So cut it down to $185,000. It covers all the expenses and then some. So I don't think we're even going to go negative, even with the facade program. And there has not been to date a lot of facade requests that we've paid out. I'm not saying that it doesn't pick up a thing, but I think we're pretty comfortable in going through at least the 2027 budget that way.

Sounds like a good compromise.

Good compromise. Thank you. All right. And then I just want to provide some related information, you know, when we look at different things. That related information, you know, here's the assessor's market values. And we're seeing that, you know, from 2021 that there was a steady increase we had some very significant increases percentage wise in the years and now we're seeing that market values are starting to drop you know and I think that we'll see them you know in the next few years we'll see them holding or dropping again you know I don't think anything real significant but I think we'll we'll see it dropping you know a percent or two THIS, TO ME, MARKET VALUE IS ONE THING. TO ME, IT REALLY COMES DOWN TO THE VALUE FOR THE TAX RATE. SO HOW THE STATE OF MINNESOTA'S PROPERTY TAX SYSTEM WORKS IS THAT YOU TAKE MARKET VALUE. We'll talk residential. You take the market value and then they have passed that there's an exclusion, a homestead exclusion. It goes up to about $517,000. It's a 40% reduction onto it. So as values go down, the exclusion goes up. And we'll see that when we look at the tax impact that a 6% levy is going to create. But if you notice that from 2024 to 2025, even though our market value is going up 24 to 25, our net tax capacity that used in the tax rate is actually going down. And that's because there's changes that legislation as far as the exclusion component to it for homesteads. And so that's really what drives what our tax rate is. And you can see it went up in 2026. Now it's dropping down again in 2027. This is a little alarming for me when I did the calculation for it. And I know the mayor's pressed this almost from day number one, talking about the tax rates and when he first moved into the city versus where we're at now. Even if we look back just since 2021, we were at a 41% tax rate. In 2027, we're going to be up to 55. Again, depending on what the city of St. Paul does, which we're second highest, we're closing in on them quickly. But here's kind of an interesting component that I kind of look at. You see our value, our net tax capacity for the local rate is just under 13 and a half million. We do our comparison or we hear a lot of comparison to the city of Mounds View. Mounds View's rate is much lower than ours, but their net tax capacity for the value is much higher and because they get a lot of that commercial. And so instead of a 13.4, these are preliminary values for 2027 as of July 31st from Ramsey County, they're at just under 16.2. If we were to have their net tax capacity for what we're levying, our rate wouldn't be 55, it would be 45. But that's not us. And so we're again in that tougher type of position and there's a lot of burden that's being put upon our taxpayers and something that we need to be fully aware of. Even today in our department head meeting, I'm asking brought a lot of this information for them to be on the same page. And it's very easy to want additional staff to do this, to do that. But it's how does the city afford to do all those things? That's where when we have those council retreats, you really set those parameters for us as we're looking into the future. What are your top priorities for us to be able to achieve those and to try to minimize the impact that we have on the residents? But we are having an impact on our residents. THIS SLIDE YOU'VE SEEN BEFORE WHERE IT SHOWS FROM 2021, IT SHOWS THE LEVY, IT SHOWS THE FISCAL DISPARITIES, AND IT SHOWS THE NET LEVY. SO SINCE 2021, AND I KNOW COUNCILMEMBER NORDBY ALWAYS TALKS ABOUT THIS, WE WENT FROM JUST UNDER 1.2 MILLION IN FISCAL DISPARITIES TO WE'RE NOW AT A LITTLE OVER 1.7 MILLION. We've raised a half a million dollars that we're getting in certain ways free money through the fiscal disparities pool because we're a winner. But it doesn't necessarily offset the total levy by a long shot of what we're doing. So we've seen the net impact that's being transferred to our taxpayers through the property tax of just under 4.7 million to 7.4 million. And that's a significant increase. But since the time that I've been here and I shared some information with, again, with our department heads today, when I walked in the door, our city manager wasn't here. There was a state auditor investigation. And the city had done a 0% levy and to achieve that had to reduce our staff by four. First couple of years of me being here was to try to get our staffing right. And so I showed them all the staffing of what the changes have been since 2021 to 2027. After that, city council gave us the top priority to our city manager Brian Frandle and myself that we needed to really work on our infrastructure. Love the terminology and I use it a lot. Our mayor said what? Show me the good, the bad, and the ugly. Let's not kick the can down the road and that's the path that we've been on. So when we look at that levy increase, $1.8 million of it has been raised towards our streets, our parks, and our facilities. So we're trying to improve those areas just as city council has asked us to do. And then, I think this is getting close to the end, that wanted to show what, again, with the preliminary values, the fiscal disparity numbers are accurate, those are final, but values still can change. Right now, the impact of a median value home in the city of North St. Paul And 2026, it was 310,600. And 2027, it's 307. You're seeing almost a 1.2% decrease in the median value of the city. With the 6% total levy, it results in about a 6.9% property tax increase for a median value home with that reduction. As we see here, if we have no value change, that 6% levy is going to translate into an 8.34% increase on the property taxes for the city portion to it. WHEN WE LOOK AT DIFFERENT COMPONENTS AND YOU SEE HOW THAT, YOU SEE WHERE THE MARKET VALUE IS AND YOU SEE HOW THAT MARKET VALUE EXCLUSION CHANGES AS THE VALUE WENT DOWN, IT ACTUALLY INCREASED AND SO IT NETTED EVEN MORE OF A REDUCTION IN THE TAXABLE MARKET VALUE. We're not the only city. I mean, from some of the preliminary numbers that a number of the cities definitely in Ramsey County we're looking at, we're on the lower end with the 6% levy request in past. I read a few articles on like Dakota County, and don't quote me on the exact percentages, but they were looking at like two different options. A lot of it's because of the federal cutting SNAP program funding that will fall to counties. But they were looking at some options that were, one option was in the 20% levy increase, and then the other one was like in the teens, middle teens. And it would require some staffing reductions. THAT'S KIND OF THE REALITY. I THINK WE'RE SEEING ST. PAUL, SAME THING, BIG BUDGET GAP AND HOW ARE THEY GOING TO ADDRESS THAT. I THINK THE CURRENT MAYOR EVEN SPOKE ABOUT SOME CLOSINGS, AT LEAST AN HOUR REDUCTIONS FOR THE LIBRARIES AND SO FORTH. AND MINNEAPOLIS IS FACING THE SAME THING AND WE'RE SEEING A NUMBER OF OTHER CITIES THAT ARE are seeing double you know looking at double-digit um levy increases um I I think the City Council was very wise in setting us at a six percent um for this year that was our Target that we were given um because you saw some of the of the reality of what the economy was doing and where things were heading So I think that, again, it doesn't say that there's not gonna be some sort of an impact. There is an impact for our residents. With that, I'll stand for any questions, clarifications, and then just to get final direction on what we will do on the 15th. So for questions or clarification.

I don't have any questions, Dan. Thank you very much for putting these numbers together. I know it's a lot of work that you and your staff put in to get all this put together, so I appreciate you going through it with us very meticulously.

Thank you. Very thorough.

I like it.

So on the 15th, we will bring documentation with the resolutions for certifying our maximum levy at that 6% with a $15,000 reduction in the Economic Development Authority. uh... unless something changes from the economic development authority that's where we would would do it would give them on the uh... that part to it uh... my final piece that i would like to say is that when we talk about staff i've got some really good news about staff and and I have to say this in a public forum. I think you're aware that Jackie had retired and Melissa was promoted in that position and I think she's done a fabulous job on the payroll and accounts payable and she's doing fabulous. But here's the bigger piece to it that as I wind down my career, I couldn't be any prouder then is that In the last two years, she's been going to school at nighttime. So she works full time, does that, and then she has, on some weekends, a part-time job that she does. So in two years, she had an undergraduate degree. She went back, and she now has an accounting degree. bad, very, very proud of her. That is not an easy task to do and she is a remarkable individual and she had to step in to fill some pretty big shoes from Jackie and she's doing a very good job and I think she has a very bright future with the city. So I want to say congratulations to her in a public forum and I wanted our city council to know that, you know, that we have some remarkable, extraordinary staff.

Good. Congratulations to her. Thank you.

And again, I thank you all for the opportunity to present and get your support and your direction. So thank you very much, Mayor, City Council members, and Brian Frandle for his leadership that he gives to us on a day-in, day-out basis.

All right. Thank you very much.

Thank you very much, Dan. Appreciate it.

All right, that's a wrap. So if I have a call for adjournment and then we'll meet in seven minutes.

So moved.

So moved, Council Member Woods.

Second.

Second, Council Member McKenzie. All those in favor say aye. Aye. See you at 6.30.

Thanks again, Dan.