City Council - Regular Meeting

Do you have the chairs at the Vets Park on Monday, then?

Call the meeting to order. Roll call, please.

Council Member Nordby?

Here.

Council Member Woods?

Here.

Council Member McKenzie?

Here.

Council Member Schwerer is absent. Mayor Monge?

Here. Thank you very much. Adopt the agenda. Motion. Why don't we start with that? So moved. So moved.

Council Member McKenzie? Woods? All those in favor, say aye.

Aye. All right. Thank you. Topics.

Thank you, Mayor. We have three topics up tonight. The first one up is the first quarter 2026 budget update. We have Finance Director Dan Winnick here to discuss.

Good morning. Good morning. You didn't go that long. We're not morning again, are we?

I told you I could speak for an hour and 15 minutes.

No kidding. I can't talk for an hour and 15 minutes tonight. Mayor and council members, tonight we're just going to kind of go over where we're at right now with kind of our 2026 budget. We'll take a look at where the general fund is now, and then I kind of do a conservative projection for the remainder of the year. Again, a lot is unknown at this point in time and how spending will – we'll go but that and then our enterprise funds and then we'll take a look back at how we ended 2025 because I want to look at the net position and the cash as net position as a comparison to what we had in our financial plans and then also cash and then there's a difference between the two of them and It's really going to be illustrative when we get into looking at item number C, which is the electric utility power adjustment, because there are a number of things in an enterprise fund that you do from an accounting perspective that really do not impact cash. But there are some liabilities and journal entries that we have to do in how we report enterprise funds because they're business enterprises. And so it does impact your net position, yet it really doesn't impact your net position in sort of way as far as cash is concerned. So we're gonna kind of walk through those. This will not take one hour and 15 minutes. There are a couple of other things if we do have some time even though they're not on the topics that I would like to just kind of have an open discussion and kind of seek some direction from the council on some things, one being the penny. The penny is going to be going away. And so some cities have our retail businesses have already made some changes. Cities have also adopted some different policies and changes. And so kind of want to throw out some concepts to you and see what you kind of favor of how we move forward with that. And also being as fair as possible that we can with our residents. especially when we come to utility payments so kind of have a discussion on that and then kind of want to just kind of show you where the assessors report for 2026 which those values they get adjusted as we're moving forward because they're they're figured as of January 2nd of 2026. And there's still a lot of process of open book. There's petitions that can adjust the values. But kind of want to show you where the values are looking at. And we've had years of growth, both on the residential and commercial side to it. And we're seeing in the past few years that residential has been just barely kind of growing 1%, 2%. Now we're actually seeing a decrease. And so that's something to be aware of, especially when we go into looking at the 2027 budget. And then kind of just want to talk about where we're at in the budget process and when we intend to be coming in front of city council with kind of like a budget kickoff. So we'll kind of walk through those different pieces. The first item that we're going to kind of talk about tonight is the first quarter of 2026 budget update and. kind of gave a little summary there, but we'll kind of go right into the general fund. What we're looking at overall for our revenues, right now projected for the year, we have an adopted budget that had our revenues for the general fund at about $10.1 million. We're projecting that we'll get about $26,000 less right now. And again, I look at things from a conservative standpoint. So bottom line is we're looking at that we're gonna pretty much meet our revenue that we estimated for and we budgeted for in the 2026 budget. On the expenditure side, again, we had a balanced budget, so we've got a $10.1 million budget. As of the end of the first quarter in March, we had expended a little over $2 million. I project that we're kind of looking at that we'll end up with at least $130,000 savings. I anticipate that to grow as the years go on. We've seen very... You know, like this past year, I think we ended up being like $900,000 under budget. The last few years, we've been in the tune of $800,000 or better. I anticipate us not being as good as that. And particularly is because we finally have a police force that's pretty much fully occupied. I mean, right now we have one vacancy. in the past when we've had these meetings we've seen ourselves in the position of two three four five officers down so we're in a much better position as far as our compliment is considered and so we're not going to see the salary savings that we've seen in the past like last year i think the police salary savings had over 200 000 in savings even though They exceeded their overtime budget. You know, that kind of offset some of the savings of the vacancies, but still, you know, they've done very, very well. We're not going to see that coming up in 2026 if things stay the way they are, which is a good thing because it means that we've got pretty much a complete, you know, force out there to protect our residents. So right now, we're kind of looking at the general fund at being about $130,000 to the positive, again, on a conservative basis. Also supplied each one of our departments that are showing there, and I'll kind of just go down to the police. Right now, I'm projecting the police only at about a $5,000 savings. Personal services only being about a $20,000 savings, and that's because for the first quarter, they actually were in full complement. We've just lost an individual more recently going into the second quarter, so there'll be a little bit of savings onto that. And then if we take a look at, so it'll give you all the revenues. It'll show you everything where we were at at 331. And again, a lot of our revenues, again, to kind of a reminder, our property taxes aren't collected and distributed normally at the end of June is usually when we see a payment with a final distribution of property taxes to the city in July. That's been delayed this year. because of ice And so the county had allowed underneath certain qualifications for Individuals to that are homeowners to actually apply And then actually extend their payment date by a couple of months and so the whole settlement is what it's called when we finally get our payments is being delayed a little bit which can be which could be hard for many cities because if you remember that that's about a good 40 percent of our income and if we don't have fund balance we'll end up going negative but as we saw When the auditor was here and we saw how our financial position is, we're sitting at a 67% of our subsequent year's budget in our fund balance, so we have enough cash to be able to float ourselves through. Ramsey County did something very similar to this during the COVID time. They kind of delayed payments to help residents, but then the burden actually shifts to the city because we don't get our money to help us cash flow. But We're in a much better position. We were only at 30% back in 2020, and we're at 67% today, so we're in a much better financial position overall. Take kind of a look at our enterprise funds one by one. The water fund, we were, from a budgetary standpoint, we were projecting about a $23,000 decrease in our net position or our fund balance. Right now, looking at everything and projecting it, I believe that we're going to end up reversing that um... and we're gonna end up about a $216,000 to the good, which means total about $240,000 to the positive side to it. Part of a lot of that additional component to it is other revenues. What you're gonna see, and you'll see it when we go down and we look at the electric department a little bit closer, that it has been historical that historically we have not budgeted our interest. that we have, our interest income. There's good and there's bad to that. The good part to it is it does allow us to accumulate a fund balance. The bad to it is is that you could incorporate that into your rates and lower your rates down. Here's the other flip side to it. Right now we're seeing a five-year bond, I think is at about a 4.2% interest rate if you were to invest for five years. When I came here during just coming in 2021 off of the COVID years, you couldn't get a bond for more than 0.6%. So what happens if it flips the opposite way and all of a sudden you put a dependency hugely on that interest income, then now all of a sudden you've got a shortage and you're going to have to make drastic increases in your rates. Now, for us at this point in time, it's worked out very well for us because we've had those 10-year plans. We haven't had to, every time we end up in a better position at a year end, it just means that we can keep delaying doing any increases in our utilities. We've been able to fund our three main categories of our infrastructure from our general fund and levying components to it. meaning our streets, our parks, and what is that third piece to it? I'll get to that if I remember. But we've actually put ourselves in a better financial position overall. Now, some of the question as we get into the electric piece to it is that we've been seeing some huge savings that have been part of the electric. And so I kind of want to dive into that one a little bit more, and that's the third item. Because what we're going to make a suggestion is that we try to, we will cap our power adjustment. It means we're going to be calculating some losses, but I think we can absorb those losses. But we'll get to that in a second. So we're seeing that the water right now is looking that we're going to end up pretty good for this upcoming year. Wastewater, we were looking at, from a budgetary standpoint, a change in our fund balance of about 94,000. I'm projecting about 183, which is another $90,000 positive that we're seeing in our wastewater. Again, good news. Our electric fund, we were looking at about a $264,000 compared to our adopted budget. I'm projecting at about a $472,000 to the positive, an additional $208,000 on the positive side to it. The surface water, we were looking at having a negative of about $187,000. I'm looking at it that it'll be about a negative of 128, again, a $58,000 improvement from what we have from a budgetary standpoint. So, so far, everything is trending in a very positive light, from the general fund to the four enterprise funds that I've talked about so far. Then we look at solid waste. If you remember, we've been running negative in our solid waste. We've had fund balance in there. I think back in 2021, we had about $650,000 of fund balance. We have enough to cover our cash flow. We don't have a lot of capital expenditures. The only capital component that we end up spending on our garbage hauling services is carts. We spend about $20,000, $25,000 a year on building up our stock of the carts themselves. So there isn't a huge need as far as you see some of those, like our water or wastewater or surface water that have a street component to it that have some huge needs and you're gonna end up bonding for a major project and you're gonna have debt service. You don't see that in the solid waste. So that allowed us to buy down that fund balance for a number of years. Part of looking at that is that our city manager in consultation with city council, We had made the decision that we were going to go out for an RFP in a few years, which we are currently, we've gone out for the RFP. We came back here in a workshop. We talked about the findings of the seven proposals. We made a recommendation to... bring in just two of those vendors for a real formal interview. There were four items that we kind of discussed with city council, the customer service component, if there was an app or not having an app, truck technology, and then bulky waste. So we have met with those two, and we threw out those four items in a number of questions for each one of those vendors, and we're wrapping everything together, and we're in negotiation with one of them. Again, can't make any of that public at this point in time, and we're planning on bringing that back to City Council in June. The nice part about it, our rates appear, from what they're gonna charge us, are gonna be going down significantly from what we're being charged today. Again, we had a very good RFP where we had seven responses, and so it looks like we will not have to change our rates, but we should be closer to a break-even point to where it won't require us to keep drawing down our fund balance. nor increasing it and not having an impact on our residents. And then we're gonna also see that we're gonna get some additional benefits, I think, for our residents that we're pretty excited to show you in June when we get to that point to it. But right now, we're pretty much where we kind of planned from an adopted budget, looking at a negative approximately 197,000. I'm projecting we're gonna be at about 198. That is not including the new contract that would go into place on September 1st. So this is based upon our current contract. So this will actually go, we won't get this negative with the new contract in place. And then in 2027, when we get to the budget pieces, we'll be much more even to where we wanna be without a rate increase. Fiber optic fund, we love the fiber optic fund. Again, we look at that the fund, Balance to change to a positive about 74. I'm seeing it staying about the same at about 75. There's not a lot of variables that are really within this. Again, you know, it's been brought up year after year by our auditor. You know, this has a negative balance. It's going to take us another 20 some years to pay it off at this rate to break even. SO NOT THE GREATEST SITUATION. IF YOU REMEMBER, THERE WERE THREE FUNDS THAT WERE NEGATIVE, THIS BEING ONE, THIS ONE ENTERPRISE. THE OTHER TWO ACTUALLY ARE TIF DISTRICTS. The money is being borrowed by the electric fund to cover those. But they're negative, but they have a solid plan for payoff because they're in TIFs, and the TIF is generating property tax, TIF coming in, revenue on an annual basis that is dropping it down significantly, and those will be paid off, and those will not be negative over time. This one... is really kind of our Achilles heel piece to it. So that's kind of a look at kind of our projection right now of how we're looking at our enterprise funds and our general fund for the first quarter. Again, all of it looks good. We're trending in the right direction one more time. and again the credit goes to City Council it goes to our City Manager and it goes to our department heads Because they are very conservative and they really do a really good job not only in the budget process But also monitoring it as it throughout the year The second item that we kind of talked about is kind of wanna and if you have any questions, please Anytime. So on this last stuff on the first quarter, let's have some questions and any dialogue that we need to have on that.

So would there be any value to being more aggressive with paying off the fiber fund?

I mean, that's a good question. Would it be more aggressive? No. The fund itself, unless there's other revenue sources out there for people to get onto that fiber, which just has not shown itself. The only way to generate additional revenue is by charging what we charge our departments to being on the fiber. Right. So then we're hurting every one of our funds because it's allocated based upon the number of employees. So then it would end up hitting the general fund, water, every one of the enterprise funds. That's the only way to generate the revenue. The other way to do it is to transfer it from another fund. And again, all of these actions require city council. The city manager and myself did look at this probably about a year and a half ago. But at the end of the day, yes, it's a negative fund balance. It's gonna take 20 some years, but really, what do you really gain from making it positive? You really don't. It doesn't help you in any way. And kind of, I think the proof of it really came out when we did this last bond rating. IT'S THERE. THEY GET OUR WHOLE FINANCIAL STATEMENT. THEY SEE THE COMMENTS THAT THE AUDITOR HAS PUT OUT THERE. IT'S A NEGATIVE FUND. THERE'S A PLAN. IT JUST TAKES A LONG TIME TO PAY IT OFF. OUR FINANCIAL POSITION AND ALL THE OTHER AREAS ARE SO STRONG THAT WE ENDED UP SEEING AN INCREASE IN OUR RATING. SO I GUESS TO ANSWER THAT DIRECTLY, WE LOOKED AT IT AND WE CAME TO THE CONCLUSION THAT IT REALLY WASN'T GOING TO GET A HUGE BENEFIT, AND THAT'S WHERE WE KIND OF DECIDED, WELL, WE WENT INTO THAT BOND RATING, AND OUR CITY MANAGER HAS A SMILE, BECAUSE WE WENT INTO THE BOND RATING And we looked at how we've been performing and where we were at from the previous bond rating. And we said, I can't see why we're not going to get an upgrade. And he was animate about it. And our consultant said, yeah, no, we'll be staying the same. And he kept going, no, I don't understand that. I don't see how we're going to do this. And I said, well, I want to push for it. So when we went in there, you've got a number of information you have to provide the bond council ahead of time. You have to go through and answer a whole bunch of questions, and then you actually have a meeting with them, and they ask a whole bunch of other questions. And what really came out of that to me that really sold to them was our conviction and our commitment to making sure that we were going to keep those 50% fund balance policies in place and that we've achieved them and that we're continuing to achieve them. And both the city manager and myself in those meetings basically said as long as we're here, that is what we promise to keep. And we're going to fight to do that. We haven't had to fight with that because our city council has been so supportive of that. But that really was what really changed, I think, that rating. And it's just the position that we've moved ourselves into from a pure financial. And then I think definitely the tenure planning was something that was brought up that they were very interested in. We had to send all of that to them, supplemental information. They wanted to see all of that. And then it's the support that we get from city council and having these quarterly updates on the budget and getting your insight onto it. And then our whole budget process. All of that, I think, all weighed into the very positive results. So at the end of the day, Ryan and I said to one another that we're going to roll the dice and we're gonna see what the results are. We're gonna push to get an upgrade and see how it goes. If we get that upgrade, it kind of takes us back to the point of we don't see the value of transferring the money from some other fund to be able to cover that. So unfortunately, Mayor, you're gonna keep seeing that report in our financial statement for I think a few years.

So the bonding agencies, it's not a negative to them. The auditor kind of came back and said, yes, it's a negative fund, but we have a plan to pay it off. There's really no, from a visibility perspective, there's really no concerns with anybody saying, oh, well, you've got this, and you should really be doing something about it. We are slowly...

And part of the comment that our auditor had said is that, and rightfully so, it does need to be brought up specifically to your attention so that you're fully aware that there are these negative balances that are out there. It also encourages to continuously look at the plan. How are you actually going to pay this off? In which we have. And then on the flip side to it is that it is a worse situation if we didn't have fund balances in other areas. If we were barely squeaking by everything and we were running negative on an annual basis in our general fund, in our enterprise funds, And we were drawing everything down further and further. Now your negative is now, collectively, it's a bigger portion. For us, that hasn't been the case. We do have a plan. It's just a long plan. But it is dropping down. But our other fund balances are increasing. So from a percentage standpoint, it's gotten lower as an overall organizational balance. you know, percent. So we are in a better position, yeah. But it's rightfully so that it needs to be brought up each and every single time, and it's part of, you know, it's good to have.

Acknowledge the elephant in the room.

Absolutely. And to have these discussions that are, yeah, are we going to get there someday?

I mean, do we... Sorry, Jason. Oh, no, you're good. Do we put... I mean, I know the desire... We're at 67%. 67% of our annual budget is what we maintain, or what we have currently, correct?

Correct, at the end of the year.

And I know the desire is to keep at least 50%. 67% is awesome. Do we put a cap on that, and then anything that we hit above that? I mean, is there... I mean, could we say anything above... 70% than that we throw in here to kind of make an extra payment, so to speak, or something like that?

I don't know. That's excellent. So if you remember when... Under the worn-out option. No, that's fantastic. So in my mind, as we were going into the 2027 budget, because over and over again, I've been saying because of the infrastructural needs that we have, and the third component now I remember is buildings. So to me, I would like to see us at least at that 60% level. So that additional 7% to where we're at, we could comfortably take out of the general fund about a half a million dollars and still be above that 60%. To me that and we haven't gotten quite to the end of where we're going to flush out at until after the department heads You know get an opportunity to go through and present their budgets to the city manager myself Before we presented to City Council want to see where we're going to be at if you remember part of what we're going to target for is no more than a six percent levy increase this upcoming year and What I've been saying is that you take those three components, the buildings, the streets, the parks, we're already looking at pretty doggone close to a 6% increase. We've got cost of living. We're in the third year of union contracts. The cost of living is 3%. You have other costs that are rising. So how do we, first of all, just get to that 6% as a levy increase? And that's where... MY INITIAL THOUGHTS WERE THAT HALF A MILLION DOLLARS COULD BE UTILIZED AND MOVED INTO ONE OF THOSE THREE BUCKETS SO WE DON'T HAVE TO LEVY QUITE AS MUCH INTO THERE. NOW, IF WE CAN ACHIEVE, IN MY MIND, IF WE CAN ACHIEVE THAT 6% AND WE STILL HAD THAT HALF A MILLION DOLLARS LEFT OVER, This is a great avenue to put it into if the city council so desires. Or you still can put it into those buckets and offset it in future years, the levy needs to it. So those will be part of the discussions as we get into the budget. Do we want to do any of that at that point? First will be do we need to to get it to a 6% and then if we don't need to or part of it, do we want to move it to some other funds and any option that's open? Totally, totally open with this originally came from electric.

Is that where this came from? The fiber money? Yes, so we're paying ourselves. BACK THEN, PRETTY MUCH, RIGHT? PRETTY MUCH. WERE YOU PAYING INTEREST TO THE ELECTRIC OR IS INTEREST FREE?

ACTUALLY, IT IS NOT, IT'S ACTUALLY ON THE FINANCIAL REPORTING, IT IS NOT COMING OUT OF THE ELECTRIC. IT'S BEING SPLIT BETWEEN TWO OF OUR ENTERPRISE FUNDS. Wastewater and water, I can't remember exactly the two of them. They split and they show the advance showing out of there. The electric fund has loans out to the two TIF districts that also have negative, and that is getting interest. And I believe the interest rate on those is 4%.

This fiber was there, but we're not paying anybody else interest. We're not paying banks. It's just how money's moving around. Okay.

I guess at the end of the day, it's, you know. What did you say?

I'm Brian. I'm sorry.

It came from the electric department, though. It was later separated out. After that? Because of the debt that the electric was seeing, that it might affect their bond rating had they go out for any kind of bonds.

But it originally came from there. Okay. Yeah, I mean, it's just a money. It's a money shift. Yeah. Okay. All right.

So currently, when you talk about, the other balances, this creates a positive in other balances, correct?

What creates a positive?

Well, if we're paying ourselves the, I'm sorry, what's the total debt that the Fiber is at?

I think it was somewhere about 1.9 million.

So this 1.9 million shows up on other line items and other funds as positives?

Shows up as negatives. It shows up as a negative advance. So it actually is offsetting the cash that's available in those other funds. Because we can't. It's a lien against the fund, pretty much. Exactly. And the same thing, so this one has the lien against two other enterprise funds. The two TIF districts have a lien against the electric fund. So if I were to go out and look at how much cash is actually in, so what we report, what you're going to see in the cash is net of these negativities. Right. but if I were to go pull up on our system today, you'll see the caches are higher because we just show it from a reporting component to it, the negative. So really, right, so in other words, we have to make it whole when we do the publication itself. It can't show negative, bottom line. This fund has no cash in it, and its fund balance is negative, but its bottom line is zeroed out because it has an advance.

Even if we paid it, I guess ultimately, we would never really want a positive balance in this fund anyway, right?

You know, I really can't answer that.

Given the state of the fiber... as it stands now and everything?

My opinion would be no, because you're not trying to utilize it in different ways. You're not trying to market it. You're not trying to make it a true ongoing business. It's more or less...

Most of it's obsolete right now, the equipment. Yeah, we're just dying on the vine.

We're just waiting for it to be done, done. Yeah, and, you know, from the original standpoint, you know, there's, you know, because there's contracts that'll be expiring and probably because this will get even worse as far as being, you know, having the $75,000 to the positive, you know, each year. because you originally um you know signed up um like oakdale um maplewood um so there's a part that they advanced so then you recognize over the 20 years well you get about seven years left and those 20 years are all done and there's no additional revenue coming from them and then Originally, there were a number of state of Minnesota contracts that were signed for different police agencies. A lot of them sunsetted after eight years. And so right now, we only have, I think, one still in existence, and that isn't for a lot on an annual basis. The library used to be a part of this. The library went away from the fiber. So we've lost streams. And then we distribute some of the cost for our own utilization from our city departments. But, yeah. Yeah.

That's what I appreciate most of the time. I think something like this would be glossed over with a city or a council because it doesn't make us look good. But you know what? We talk about it. We want to make sure it doesn't happen again, stuff like that, and we need to address it. So I'm very happy with the council and staff is, you know what? We talk about things at work and we talk about things that aren't great.

Absolutely. And I think that's, at least in my time here, that open dialogue is what's put us in a very positive position. And it's really not just one fund, it's across the boards. And I think it's that and the willingness to do the planning and looking out and making those tough decisions decisions and tough calls. And again, you have to make some very tough decisions, especially when it's having impact on our residents. Because again, we have a heavier reliance on that property tax. But we're putting ourselves in a better and better position to make sure that we're covering all of the needs in the city and we're We're not to coin a phrase, but I guess I will, kicking the can down the road. So we're addressing those needs. And to me, I'm very impressed by that. And again, a lot of the leadership from my side on a daily basis comes from our city manager and the planning process. And then it's totally supported by city council. So I think we're in a very good direction and in a good position. So I thank everyone for that.

Well, would it benefit our city if any of these new fiber companies coming through would extend through our lines to go through our our conduits that we already have in place to reuse what we have put in years ago.

I know Brian's been working with the groups and it hasn't been going well for that part of it.

Yeah, I'll defer that to the city manager because he has been more active in that side to it.

We did try. They were installing some fiber in town here. The path that they were going, it met part of the path, but not all the path, so where they're starting and stopping didn't turn out to be exactly where the conduits were, so they just said it was easier to not use it and put their own in, which is unfortunate. So we'll try when we can.

That would have saved us a lot of money. Okay.

Any other questions on the quarterly update?

No. Looking good. Appreciate it.

And we're going to move and kind of look at net position and cash. And so what I've done is just kind of to show you where the change in the net position. And you'll see from the 2025 budget, then the 2025 actual, and then what the variance is. And you can see, you know, what I kind of mentioned before in that general fund. We were looking at, you know, at the end of the budget and the amendments that we were looking at being a minus 20. We ended up being $910,000 to the positive, so it becomes a variance of $930,000 to the positive. You can look at we have all of our funds that are budgeted. SHOWN HERE AND YOU CAN SEE THAT FOR THE MOST PART THEY'RE ALL POSITIVE. WE HAVE A COUPLE OF NEGATIVES, THE WATER AND THE WASTE WATER, SURFACE WATER AND FIBER OPTIC FUNDS. BUT YOU SEE ONE THAT TO ME REALLY STANDS OUT A LOT IS THE ELECTRIC FUND AND THAT'S WHY WE WILL DIVE INTO THAT ELECTRIC FUND IN A LITTLE BIT. KIND OF WANT TO GO THROUGH AND KIND OF LOOK AT, YOU KNOW, WHEN WE LOOK AT FUND BALANCE, FUND BALANCE HAS DIFFERENT CATEGORIES. SOME OF IT CAN BE RESTRICTED FOR SPECIFIC USES. SOME OF IT'S UNASSIGNED OR UNRESTRICTED. IN OTHER WORDS, IT CAN BE USED FOR ANYTHING. And that's what this next page will show is of that change for the year, what is truly unrestricted, unassigned. And you can see when we look at it from that standpoint, again, you're seeing mostly positive amounts across the board. which is you know the biggest one that has the negative is this again that solid waste which that's what we had planned um is to buy down some of that fund balancer in that position um until we went out for an rfp and then hopefully we would get um better rates um that and and not have a significant impact on our residents and then When we get into our financial planning, one of the biggest things that I do is I don't necessarily like to look at net position because there's other components that are a part of it. It's really looking at what do we have in cash. And so this shows how we ended up changing our cash. It'll show what our beginning cash balances were. It'll show what our ending cash balances are and what the change was. And again, you can see from a cash perspective, we're seeing a lot of positives across the board. Solid waste, again, is the one that's negative. But again, that's kind of what we anticipated as we went in there. But again, you can see. If I just go back one, you can see unassigned in the electric is 1.8 million, but then it's 1.4 when you get into looking at the actual cash change. Again, some of that is due to some accounting principles that have to be incorporated, and we'll get into that when we go into our next item. But again, across the board, whether we look at it from You know, overall net position fund balance to unassigned fund balance and cash. We really did perform very well in 2025.

Can you I'm again, I'm not an accountant. Maybe you can explain it to me the surface fund. is the unassigned, unrestricted, we're at 301 net change, but then the change in cash is 1.1 million.

YOU'LL SEE A BIGGER DIFFERENCE BETWEEN THOSE TWO COMPONENTS LOOKING AT UNASSIGNED AND THEN CASH IN THE WATER, SURFACE WATER AND THE WASTE WATER AND THAT'S BECAUSE OF THE BOND. OH. BECAUSE THE CASH WILL REFLECT bond money that hasn't been spent as of year end. And so in that one, I'm glad you caught that. And that's the thing. So when I do the 10-year plans, I will reduce cash, and I'll show it on a line. I reduce the cash by what bond is outstanding. Because that bond is really, and that's why it's not unassigned, it's restricted. It's restricted for a specific use, even though it's in your cash. So I'll reduce the cash by that amount of that balance. So When we're doing our future planning and looking at everything and our needs, we're not incorporating something that really should be being spent. It's just a timing piece to it.

Okay.

Good catch. Excellent. And then this next item, I kind of want to show you the electric fund and kind of – show that net position in cash and kind of break it down into some different categories and kind of show you a little bit more about it. But more importantly, at the end of the day, this item, and then it is on the consent item for City Council for tonight, is that we would really like to move to capping the power adjustment for the summer months. And I'll show you through here that we believe it's a start in the right direction to be able to, I guess, more equalize the rates that we're seeing in the electric. And I think it's a beginning, but we'd like to start it here, see how this plays out, and then look in the future for some other different adjustments, and I'll kind of walk through that part to it. When we look at our net position, you know, changed, you know, $2 million overall, our cash about 1.4. Again, some of the items that you'll see that we have investment income and we don't budget that. Is that something city council wants to do in the future? There's pros and cons to it. Can we do some of it from a conservative standpoint? Yeah, I'm not going to disagree with that. That might be a good idea. Would we want to do all of it? When we're sitting, you know, at rates, investment rates over 4%, what happens if they all of a sudden end up being a half a percent again someday? Then we've got a whole of, you know, a half a million dollars. So these are looking at it from different budgetary line items. So our energy power sales from what we budgeted was down about $204,000. And I put them in categories. Does it affect net position? Does it affect cash? Some of these affect both. Some of them only affect net position. Personnel services, in other words, costs for our personnel was under budget by $106,000. Processing fees weren't budgeted. They were $130,000. They were budgeted in the 2026 budget. Other changes that are non-cash were 246. There's a whole list of small items that make up that 246,000. Inventory, $276,000 increase. Cash, we actually did the outlay of the cash. But when you do a financial statement, you do an inventory as of December 31st. Our inventory grew $276,000. So we don't recognize that. It becomes an asset until... We actually utilize that. So that's where that shows. Again, it's an accounting component to it. Power purchase line item was under budget $501,000. We don't budget depreciation, but depreciation was $151,000 for the year. Capitalized assets. We paid $125,000 for assets that we capitalized, but what do we do? THEY SHOW UP AS AN ASSET AND GET DEPRECIATED OVER TIME. THE CAPITALIZED ASSET AND DEPRECIATION WORK TOGETHER OVER THE USEFUL LIFE OF AN ASSET. BUT IT DOES IMPACT YOUR NET POSITION. PENSION AND OPEB REDUCTIONS. We have an actuary that does our pension liabilities. It actually did a reduction of $174,000. So it shows as a reduction in our expenditures as a journal entry that you do for it. It didn't affect cash, but it affects your net position. Now, things can change. Inflation, you do the actuary next year, and all of a sudden, before you know it, this could be... increase $400,000, and all of a sudden $330,000. So our net position could actually drop $330,000. It doesn't impact cash, but how it's reported will end up changing. Contractual services that were budgeted but weren't spent, about $116,000. and then there was capital that was budgeted that wasn't spent of 147. If we add all those in the net position, it'll come to that $2 million, yet what impacted actual cash was less and came to that 1.4. And so then I kind of broke it down into different categories to kind of illustrate a little bit differently in saying what's not budgeted, what's over or under budget, and then what's purely financial reporting. And so if you added up the not budgeted and over and under, you would end up getting what the cash is, and then the financial reporting and the cash is what ends up coming to your net position. Power adjustment. As we see by the graph, When we look at our power adjustment that we then add on to the rate for utilities, it spikes, and it spikes in the four summer months, June, July, August, and September. Okay. I've got this nice spreadsheet that I can show you, and actually I'll kind of pull it up real quick. These numbers are based off of this spreadsheet. And in this spreadsheet, we take every residential service that we build, every commercial service that we build, all the number of services that are billed that, every single month in the consumption period, We have the monthly service charges, the annual service charges. We have the KWH rates that are given each month. We annualize that. There's another component that ends up coming into this, and that's at the end, it shows that the bill, it can either be known as the fuel clause, but it shows up as a power adjustment on an individual residential bill. And in our rate, it was always structured to cover six cents. As rates have gone up, And no longer it exceeds that. And so you can see in this column right here that that's what it's over. That's six cents because here's the actual average. And then in addition, there is by our supplier, MMPA, there's an additional adjustment that they put on, and that's what it amounts to per cents. So when you add up this, what's over, and this, you'll end up getting what is the fuel clause or the power adjustment. And you can see in January it was one and a half cents, one, eight, two, three, three, six. Then you get in the summer months, it's almost five, eight, four, six, four, six, five, two, three, one, one, seven. Well, our rate already increases. when we're in the summer months in the summer months it goes from 1143 to 1251 so if you add up those two together we're getting you know higher spikes in those summer months in addition to usually consumption is up during that time and so many of our residents are experiencing a significant increase in their utility bills during those summer months So what we would like, what we're proposing, and it's also again on city council in the consent, is to do kind of a pilot test and make this go into effect for this summer to see if we were to cap that off what type of impact that would end up having. And then down below is the commercial. So just did a tab with all of the same information and what I did was that in the fuel clause, I've highlighted right here, is that during the summer months, I cap it at four cents. Instead of being five, six, five, eight, or whatever it would be, it's at four cents. If we do that, it'll result in a change of our loss of revenue of $171,000 for our residents. This is based upon 2025 consumption. And for commercial, it would be a reduction in revenue of about $106,000 for a combined reduction in revenue of about $277,000. I think you've already seen that we should be okay in this fund to be able to do that. And we may, after this, want to do it even differently. But we want to try something to start out. It was kind of interesting. I kind of looked at the total rate that we have today and the revenue that we generated and where our revenue is. And it was kind of interesting that our total revenue comes out to about $11.4 million based upon the consumption of 2025. And then I compared that to what we have for our budget for 2026, which is almost 11.5. Right now our rate is showing if we have all of those revenues that we would end up having a difference of about $87,000 negative. That's just the rate part to it. That's not any of the other revenue items that we do. So in certain ways it shows that our rates are Okay, which really get building up our fund balances year after year is that we don't we don't we do not at this point in time, budget that investment, which was like $588,000 last year. You know, we're not budgeting a couple of other items, and we've had savings. FROM WHERE WE BUDGET. SO THAT'S PART OF WHY AS WE GO INTO THE BUDGET PROCESS, WE NEED TO MAKE SURE THAT WE'VE GOT OUR BUDGETS AS TIGHT AS POSSIBLE, THAT WE'RE NOT HAVING EXTRA MONEY, SO WE'RE NOT HAVING THESE, WE'RE SPENDING CONSIDERABLY UNDER OUR BUDGETS. IF WE CAN PROVE THAT OUT OVER A YEAR THAT WE GET THROUGH AND WE'RE LOWERING where we're at, then we could actually drop our overall rates and do more of an analysis. But right now, just at a high level, our rates are really where they should be to support the operation. The revenue savings are coming from other sources, and that's something for a future discussion with city council. Do we want to start moving towards budgeting some of that? That's where the city manager and myself said, okay, In a roundabout way that's what we're gonna try to do by projecting about a two hundred and eighty thousand dollar loss in revenue That we know that we can absorb and also help the residents during those summer months And so that's kind of we'd like to try it here and try it this summer and see what the results are And see if residents notice it See kind of how things kind of flush out what the reality of the loss really is and then look at as we're going into next year, maybe making different types of changes, maybe in the rates, maybe more of this capping of that fuel cost adjustment piece to it. So those are kind of the thoughts and definitely we'll open it up for kind of discussion onto that. But that item is also with the same documentation showing up on city council for consent for hopefully to have city council prove it so we can put it in place for these summer months.

What was the last time we had a rate increase again for electric?

I think it was 20, maybe 22.

Yeah, that's good. I mean, that's plateauing. Now we can see from there without.

MAKING A RADICAL CHANGE. YEAH, AND THAT'S WHAT WE'RE TRYING TO... KIND OF LIKE WE RAISED IT LAST YEAR, NOW WE'RE GIVING AWAY.

WE RAISED IT THE YEAR BEFORE. WE'VE HAD A GOOD LEVEL WHERE WE'VE BEEN.

I LIKE THAT. THAT'S WHAT WE'RE TRYING THIS OUT TO SEE. AND PART OF IT IS THAT WHEN YOU DO LOOK JUST FROM... I always equate it to myself. It's also when I open up my Excel bill and all of a sudden I see a bigger spike when it comes in the summer months because my consumption's up too. It's kind of hard to handle. And this we're trying to even that flow a little bit and see how this goes. But it's amazing when you just adjust something just like a cent across the board. IT CAN, WE WERE ENTERTAINING LOOKING AT INSTEAD OF HAVING THAT INCLUDING SIX CENTS IN THE BUDGET OR IN THE RATE TO MOVE IT UP TO SEVEN CENTS, IT EQUATES TO LIKE A MILLION DOLLARS IN LOSS OF REVENUE. I WAS LIKE, OKAY, WE GOT TO COME UP WITH A DIFFERENT PLAN HERE AND KIND OF LOOK AT THAT. AND THAT'S WHERE WE LOOKED AT THOSE SUMMER MONTHS AND KIND OF SAID, OKAY, LET'S START HERE AND TARGET THAT FIRST. and see how that plays out. And then we can expand upon that in future years.

How does this go into effect by the May billing or June billing?

It'll go for June consumption. That actually goes out in July because we bill after the month of consumption.

Dan, thank you very much for this. I appreciate this. And I think this is implied. I just want to hear it. With this plan, you believe that the city will not seek a rate increase in the next budget cycle? I'll guarantee it. Okay.

There you go. And it was implied? I just wanted to make sure we're on the same page.

Oh, yes. Yep. Yep. Absolutely. Yep. Okay.

I think it's a safe way to dip your toe in and see where we got. See how it plays out, yeah. Well, as long as the residents save a little money, that's the biggest thing.

I'm sorry. As long as the residents can save a little money, that's the biggest thing.

Exactly, and that's where we're just trying, we're trying to help out a little bit and kind of even, I always look at things, you know, I mean, if I could pay the same amount, I can budget for it, and then all of a sudden you get these big hiccups. That's what I think creates more issues for residents AT LEAST FOR MYSELF AND I THINK FOR OTHER INDIVIDUALS. AND THAT'S WHAT WE'RE TRYING TO EASE THAT A LITTLE BIT AND SEE HOW THAT PLAYS OUT. AND YES, THERE WILL BE NO RATE INCREASE IN 2027 ON THE ELECTRIC SIDE. Right city manager?

That's correct. Well, we unfortunately lost when we had our, we had an AC control program once upon a time a while back, but we no longer got credit for that program through our power agency, so that went away. But that helped with these summer spikes. So this is a nice alternative.

That's the one where they could cycle it on you?

Yep. Yeah.

I would be giving my AC a bear hug. Nobody's going to turn that off.

AND SO AGAIN, THIS DOCUMENTATION HERE WILL BE, YOU KNOW, IN CITY COUNCIL ON THE CONSENT ITEM. HOPEFULLY THAT YOU'LL PASS THAT AGAIN. WE'RE LOOKING AT AN APPROXIMATE SAVINGS TO RESIDENTS, ABOUT $171,000 FOR COMMERCIAL OWNERS, ABOUT $106,000 FOR TOTAL SAVINGS, ABOUT $277,000. SO THAT ITEM WILL BE NOT ON YOUR SCHEDULED PROGRAM, BUT WE Have a little bit more time, a little time left. Can't believe I talked this.

Thank you for the explanation. That was great for what we're doing with the, with the electric. So that's a lot of questions that would have came up.

Yeah. Yep. So now you're going to next ratings. We're going to go next. And you just kind of want to show you, this is kind of, uh, this is Ramsey County's assessor's report for 2026, which is, will be applicable for pay 27, which we'll be working on the budget. And you can see here that, um, you know, overall for all for nursing pay for all different types of properties that we're going to see about a 1.6% decrease. Um,

Sorry, I'm just laughing because the screen down here is just showing the mayor.

Oh, is that what I look like? I was going to say, who's that old guy on the screen? There we go. Thank you.

If we look at residential, we're gonna end up seeing about a 1.2% decrease in our median value from 25 to 26. So this is the first decrease that we've seen in residential property in a number of years. So you see that things are tightening up. There was an article, I think, in Star Tribune today that shows kind of the last, I think it was a couple of months of sales that have shown like a 3% decrease in price on homes. And so we're seeing, and I've read a number of articles and they're projecting that we're going to see home prices decrease, especially as interest rates stay the same or increase a little bit. I think they're right now, I think 30 years, that some are at about a 6.4% interest. And they see that's going to kind of, if it goes up a little bit, we're going to see the prices dropping down a little bit more.

My wife's still seeing them go up, so that's good.

Yeah. Yeah. AND THEN WE DO SEE, AND I'LL JUST KIND OF SHOW YOU REAL QUICKLY THE COMMERCIAL, COMMERCIAL IS ACTUALLY INCREASING, WHICH IS A GOOD THING BECAUSE THEN IT SHIFTS SOME OF THE BURDEN, YOU KNOW, ON ANY POTENTIAL LEVY OR WHATEVER, YOU KNOW, TO COMMERCIAL FROM RESIDENTIAL. BUT, AGAIN, WE DON'T HAVE A GREAT DEAL OF COMMERCIAL

And this is Ramsey County?

This is Ramsey County.

So it's even taking downtown St. Paul into account for this?

I'm only looking right here just at North St. Paul. Okay, good. This area to it and that stuff.

I didn't know if Ramsey County, if they just, you know, how that takes, if it's just a snapshot for, so yeah. I'm glad to see ours are going up.

Yeah, and we can definitely look at what's, well, they break it down into different areas. That's fine.

Yeah, I just hear the horror stories about what's selling down there commercial-wise in downtown.

It's kind of funny that, you know, here's the downtown in St. Paul that they're saying it's a 26% increase, but we know that that's not true because the most recent articles that they're selling things, A lot lower than the estimated value. So with that is where it ends up coming if a business purchases a downtown business for a lot less, then what does the owner do? They go in and they petition. And what do they do? You can abate the taxes for the current year and two priors. So then we end up seeing adjustments on what property tax gets distributed. So that kind of shows you the market values. Dan, I have kind of just quick input on... We're good. Quick input on... I think as everybody's aware that the penny's going away. WHICH KIND OF CREATES KIND OF AN ISSUE FOR BOTH, YOU KNOW, FOR ALL BUSINESSES. AND WE'RE NOT GOING TO HAVE PENNIES EVENTUALLY TO GIVE OUT TO PEOPLE HAS CHANGED. SO IT'S KIND OF LIKE WHAT DO WE WANT TO DO WITH THAT KIND OF COMPONENT TO IT. And a number of cities, and I have one just in front of me, that Forest Lake, we did a staff report to their mayor and city council members at looking at kind of two options. One was a no change policy with utility billing. Credit option so in other words If somebody came in you know so the calculation is going to run the same way But it ends up we they give no change it just goes a credit on their bill so I came with $130 and it was 129 50 50 cents would go on the next time so they credit it and again if they move if they move out of North st. Paul you know they get a refund check of their full amount that way we're not shorting You know the individual at all The other option, you know, and a lot have done is you go to a rounding policy, which creates so many other issues. And so really they recommended going with that no change city. And for the most part, you know, everything that's being charged on for, you know, at The permitting and that stuff is all zeros at the end. It's really the utility billing component to it. And so really that would be kind of, you know, seeking your direction, but kind of like to move into a no change policy. And so then we do away with change. But then it just goes as a credit. And again, when somebody moves out, they get the full refund. It shows the pennies show up there. It helps us out with balancing. It helps us out with everything else on a daily basis. We don't have to look at sort of rounding mechanisms in our systems. And it just doesn't increase our costs at all. And it would be something that You know, we would advertise, you know, for a month or two months before we would actually implement it. And, you know, we wouldn't just throw it on people tomorrow. But that'll be an item, if city council's up, you know, for it, it'd be an item that would go in front of city council to be accepted with a policy. I see that as being very fair.

Okay. Rather than trying to keep track of things.

Okay, fantastic. I can't believe I'm making it this long. Brian, I told you I could talk this long.

We didn't even get a seventh-inning stretch.

I know. And then the last thing, I just kind of want to let everybody know, staff updates. We have an individual who's been with us for 10 years that will be retiring on Friday. Thanks to the support. from our city manager, and then from Jenny, from our HR perspective, because she wears multiple hats in our organization, that we went out and posted that position early, and we did, the initial part to it was promoted an internal posting, and so we have an individual who's working on their accounting degree, And they got promoted into Jackie's position. And the two of them have had the ability to work together for about a month and a half. And she's all ready to go. And so we should have no, we should be pretty seamless. We should have no hiccups on that. And then that leaves a vacancy that'll be vacant after Friday. We went out and posted that position. and we had 89 applications and we three of us went through each and every one of the applications we combined our ranking we offered I think 14 or was it 14 interviews some Declined I think we ended up interviewing nine and then we brought three excellent candidates back in for a second round interview and We were split. We had four on the interview. We were split two-two. And we each had one and two in reverse piece to it. But we did go and offer to one individual. We could not reach agreement on salary. And part of the way I look at that is that I don't want to upset the apple cart as far as our existing staff is concerned and pay somebody more who's already been here for years. So we weren't able to make agreement with that. So we went to the next candidate. And we have, again, that person was first on two of our lists. We offer that position. They have accepted. They have gone through the background check and the financial check, and everything's coming out really good, and they'll be in place on June 1st. They'll be coming and joining this wonderful North St. Paul team, and so, yeah, so very excited about that. We will miss Jackie quite a bit. She's done an excellent job. She's been responsible for our accounts payable, our payroll, and she's done a fabulous job in her time here. BUT I THINK WE'RE SITTING IN A VERY GOOD POSITION AND MOVING FORWARD, AND I THINK WE'VE GOT A STRONG CANDIDATE NOW COMING IN TO REPLACE MELISSA, WHO MOVED OVER TO JACKIE'S ROLE, AND SO I THINK WE'LL I think we're stronger now with duplication of services than we've ever been in the past, and we're continuously improving that. And so I thank City Council for all the support that you've given to me and for my team, and I want to give a lot of thank you to the city manager for allowing us to be able to move ahead of the process. Instead of waiting for a vacancy. We didn't create any additional costs to our budget doing it this way But he helped out greatly and then Jenny for doing all of the HR stuff and then making herself available on the interviews and Unfortunately, we weren't the only ones who were interviewing police was interviewing public horses interviewing electric was interviewing and So she was running all over the place. And this is the first time I think that Jenny really realized how lucky it was that the city's not like 30 miles by 30 miles because she would have been all over the place. But yeah. So no. So eventually, you know, hopefully you'll have a chance to come down and see our new staff member. And yeah, we're a friendly group.

Great. Yeah.

Good. So with that, if there's any follow-up questions, I think I've... Everybody good? I give you six minutes back.

Oh, good. Well, appreciate all the great information, and thank you so much, as usual. We always learn a lot and know how to move forward. So if there's nothing else, I'll ask for adjournment.

So move.

So move. McKenzie? Second. Second. Norby? And we'll start up in five minutes or so. All those in favor, say aye. Aye. Thank you.