Finance Committee - Regular Meeting

So the young thing is. And so she's gonna Yeah. Because of.

Okay. We're we're good. We're live.

Guess we

got a good afternoon, and welcome to the Monday, May 18 meeting of the finance committee of the Olympia City Council. We have councilmember Green and myself, councilmember Gilman here, and councilmember Vanderpool will be joining us momentarily. He's in another meeting upstairs. So the first item is to approve the agenda tonight. What do you think?

I would move to approve the agenda as published. Wonderful. I'm gonna go

ahead and second it. All in favor? Aye. Aye. Alright. We've got an agenda. Is there any public comment, mister Casey? No. There's no one for public comment. Nobody signed up for public comments. Okay. We'll move on to the minutes from last month on

the April 20 meeting. Move to approve the minutes.

Second. All in favor? Aye. Aye. Okay. That brings us to committee business. And I think Joe was just gonna write a number.

We're gonna Michael is out there.

Alright. Finance director Michael Gibbons will talk to us about our budget spotlight on the expenditure approval process.

Yes. Thank you. So as Jared Gilman and I were talking about some possible budget spotlights. This topic came to light because I think we haven't talked about it much. And so this is how the documents really end up what process the documents that end up

on that council consent

agenda go through that are related to finance. So PowerPoint for you, of course. Share screen.

Green one on the bottom. Bottom in the center. Bright green.

So while Casey's bringing that up, I think one of the parts of this is I was talking with our accounts payable, which accounts payable is that division for for those who may be non financed folks that pay the city's bill. So all of the invoices come that come through there as well as our payroll accounts who also prepare one of the documents that go on the expenditure approval report is just the really careful process that all of these items have gone through before they end up there. And so this is my presentation on really how that happens. So the first slide on the deck well, what are you approving is essentially what I've talked about. The accounts payable, we typically do a weekly check around for the city.

And when we say check run, that's we print an amazing amount of paper checks, surprise, but we also have a number of electronic fund transfers to some vendors. That way they get their money immediately. And then, of course, the semimonthly payroll and all benefits that are related to that in the month of. So we'll talk about that in brief here. Next slide. So accounts payable. I took you through the process here. I'll highlight it for a minute just for those watching and in the audience. So invoices are received by finance. So once we've ordered something in the city, and it could be a professional services invoice from an architect.

It could be office supplies. You you see that amount, but what's happened behind the scenes is an amazing amount of careful work by city staff. So the invoice comes in and accounts payable sends that out to the department cost center managers for review. So they're going over it, and they enter it into the Workday system. So once that's been approved and gone through that series of approval processes, it comes back to accounts payable for an really kind of a final audit, if you will.

We're looking at things in finance that maybe double checking the department's work. For instance, if it was an out of state vendor that shouldn't charge sales tax but didn't, then we're applying the sales tax. All of those details are gone through. We do a couple of different types, and I highlighted it there on the slide. We do an a number of one off payments. So those can be a good example of refunds to our some of our utility billing customers. So maybe somebody moved out. They have some credit on their account, so we're doing a one time payment with them. We call them ad hoc payments. These are typically one off payments.

We're not going to repeat a payment to that customer. We also do all of our payroll benefit payments. So those payments that are related to insurance. So medical insurance for employees, all of those payments that go out and run through the accounts payable system. So and I I mentioned just kind of in the warm up, we do a lot of paper checks because a lot of vendors, you know, particularly these one off payments, we're we're not gonna ask for somebody's banking information to put it into the Workday for A number of vendors are.

We have a policy about this because as you're probably aware, fraud is pretty random around the FTP. So we have that lockdown pretty tight that banking information is carefully entered into the system. We don't change it without verifying that it's from a credible business that's asking us to change it because the truth is businesses don't change bank accounts very often. Fraudsters will tell places like a city, hey. Change my bank account, but it's not really that person.

So we're really careful about that. Next slide, Casey. So this is the expenditure approval then that comes to council. So this is by fund the total amount that we've clocked. He did that weekly accounts payable run.

And so that's the process that we really went through to get these amounts on there. So one final check is that one of the accounting managers and I signed off on it along with the accounts payable lead who's really done all the work. So by the time it gets to you, it's gone through all of these processes of departments receiving the invoice, verifying that AP. Before we sign off on this, then AP's run total so that we can verify that that matches. Then it comes to you as we're required, and you approve it as a complete or or as I should say, it's not necessarily a weekly business agenda, but as we do them too.

So just out of curiosity in this process, is there anywhere that this intersects with budget? Like, if somebody, when they're seeing those payment vouchers, saying, you know, this is coming out of the budget that only has $7,000 in it, but it's a $10,000 expense. Like, does any of that happen in this process, or is that all

Yeah. That's a that's a good point. I'll start on it, then I'll ask Joan to fill it up in. So a lot of times, there'll be a budget check required in Workday that will automatically go to Joan. Of course, we ask that staff monitor their their, you know, supplies and services budget. So they might go over in one line, but they have a plan for it. But do you wanna talk about when there's an auto check finding?

Yeah. So our our budget review is done at the cost center level, excluding payroll. And so any of their thirties and forties, which is supplies or professional services, it looks at the amount that's available there. And as long as they have the amount that we have budget, those totals, it goes through without any any flags. If they have a shortage in those two areas, then I get a notification through Workday, and I have to review it with it to move forward. Okay. So, yes, there's a a better check.

And there's even some other levels at Workday where they if it's a large, say, construction invoice, it's gone through some more levels to maybe the director of the department where, you know, low volume office supply invoice wouldn't and sometimes even to me. So, you know, we've been I I also will say the city's been carefully audited by the state auditor's office, so these processes have been reviewed. And I think we all, including me and finance staff and the auditor, feel good about that process that's going through. Workday is great because those invoices are all in there. You can look it up.

You can see kind of what's happening. Sometimes staff are great to include many emails that better explain kind of what's happening. So that's kind of the the crux of it. You know, there's a not to take you too far into the I'm not scared of the interest. But there's you know, the city uses, I think, a lot of processes to save time and money, such as the big procurement card, which is a credit card, which we get a rebate for.

So it it also adds a little money back into the city, but it also makes some of the payment processes for streamline. Those also have very a high level of check and balance to them so that, you know, we're careful on what's being coded but also received. So that's really then what comes to you that you're seeing in the agenda. And I know if you have questions, you can always ask Jay. They'll get with me, and we'll get you the answers that I have.

And it varies week to week, and you've seen that because some weeks, we we may have, you know, towards the beginning of the month, we're paying some of the larger commitments the city has in by way of accounts payable, and so it just really varies on what happens. So payroll's the next large amount that you see coming through the consent agenda. If you wanna go ahead. Payroll and fire engine. So time is entered and approved in Workday before coming to payroll, and that's really dependent on employee time.

You know, we have hourly employees. We have some employees that are salaried and only enter exceptions such as leasing. But once that happens, so a a pay period closes as it did on Friday. So people are entering their time. Managers are approving it. We have a cut off. It comes into payroll then. They're running some reports to check for things like, that would be exceptional. You know? Does if for some reason, somebody enter way more hours than they should or maybe have too little hours if that's the situation.

They're checking all of that. It's a pretty rigorous process. Payroll has to have the process completed in Workday two business days before payday. So for instance, this week, the pay period ended Friday. We have the weekend heading in between there. Paydays is a really short payroll for us because payday is this Friday. So they really just have today, tomorrow, and then it's gotta be translating to our bank, the Citibank bank, by noon on Wednesday to make sure

it's in everyone's account appropriately.

So that's what happens really through that process. Just to, I think, explain to you all, it's it's got checks and balances built into it. It's going through. Once payroll is processed, by that, I mean, the people are paid, then payroll is going through and processing the benefits that are associated with it. We brought the quarterly tax filings back in house when we first went to Workday.

We used a company to do that. We're doing that all. So those are remitted as per IRS regulations. Those have to be transmitted to the the IRS within forty eight hours. Now take care of, take the benefits related to payroll accountants, do everything from filing the paperwork with DRS, Department of Retirement Systems, getting the medical expenses, any other kinds of orders or garnishments that we're required to do as an employer.

That's all entered in then. The reason I'm calling out the benefits again is it's a bit more like the AP process. It appears under AP approval because we're cutting grand payments to those individual vendors. Paid fire pension employees are paid on the twenty fifth payday or whatever the last few sort of day is before the twenty fifth. And then the other note I would have here is that most city employees are paid with a directive cost.

That's the most efficient way to get folks their money, and so we it's a very high percentage of our employees that are paid that way. And then the next slide, Casey. This is the certification page that the council sees for the payroll process. And as we were going through this, payroll account was said, you know, we can probably update this because it's a bit of an older form and has some of the when we used to issue more payments by check. So we may look at streamlining that so it's not got as much blank space on it.

Again, we're given totals. This is done for each pay period. So the two payrolls a month, the totals are made sure that they balance. And then typically well, an accounting manager typically happens to be filled. So the case to me here signs it, and then and reviews it. I review it, design it, then it's sent to the city manager's office for it. That's what you all see then on your consent agenda. So, again, it's gone through a rigorous process for. And I think with that, that's my budget spotlight or our budget's not high because of it. I was just the voice here.

Any other questions, Kelly?

No more question.

Could you just tell us a little bit more about as we've got Workday implemented, are there are there a lot of little filters or screens you can put in that say if if it's, like, the the budget amount, you put parameters and the same with the payroll, is it it has, control controls Yeah. You would that you can tweak the the what what discrepancy gets flagged, what level of discrepancy?

Sure. Sure. You know, as Joe mentioned, we have certain parameters set around, you know, the flag that's on budget. And that's some of what payroll is looking at in their audit process. Does anything look out of the ordinary? There are pretty strict controls in the system so that if someone who maybe have the permissions to let's say, change a salary, it's not just going to let, you know for instance, me, I'm not just gonna be able to change my salary. It's gonna go to my supervisor or a group or then on to someone else. It's really gonna go for that to HR. So there's lots of checks and balances and controls in there to make sure that things are correct. And then human eyes are looking at things.

So oftentimes, accounts payable will ask me or one of the accounting managers. Does this look like it's coded correctly? You know, could this is this something that's different? Again, we can run some reports given what we described. You know?

Does this fit? We can, you know, a lot of time is run some vendor reports to look at, you know, the kinds of payments we've made. So when I, for instance just to bring it up again, a big payment we make monthly is The US Bank for purchase cards before that's given the final approval by me. I I typically look through it just to see kind of what's standing out, kind of that same thing you're saying, what and what auditors do. What's the largest expenditure we have?

Does it, you know, do a lot of spot checks and things and just make sure everything looks true and correct. And so that when the auditors do come in and others and I'm asked, I can say yes. The finance staff and I do periodic checks and we're looking at things

that come through for me. Sounds like it's a it's a mix of things that can be automated within Workday, but still having humanized people running a 10 key. Sometimes. Yeah.

Workday is, I think, I will tell you, has made some parts of what we do in finance efficient. So the accounts payable process, it's a it's a really efficient process. I mean, we're you know, we have one employee, which, you know, when vacations happen, that gives us a bit of a pinch. But I think the positive side here is we could have one accounts payable accountant for a city our size processing things because of the efficiency for us, and really with payroll too, it makes it more efficient on a lot of levels.

I appreciate that, and I I I hope it's helpful. We get that as part of our consent agenda, a packet of the bills that will be paid. And Mike and I just talked about how it might be helpful to just stop for a minute and look at what's in those those packets. Yeah. Thank you. Well, maybe we'll just we're just gonna sort of build across the agenda. So next, we're gonna talk Mhmm. About the budget process. Oh, wait. The city manager has a question on this item before we move to his item. I'll give that. So

Well, thank you. I was wondering if you guys could see me. I put my hand up. I wasn't sure if you could see me, but just a couple other quick items I'll add on that. To council member Green's question, I wanted to point out that we, I hold department directors accountable to their bottom line, not line by line.

So they're able to bend and flex and maybe go over one area, but they have to make up for it somewhere else. They have to end the year within the budget that they were provided, that you all approved, unless they get approval from me or for you to go over it. So Joan does look at that stuff, and there's good conversation amongst us when they're going over, especially if they're going way over on something so that we can have conversations to make sure they have a plan to make it up somewhere else. So I wanted to make sure, that got part of this conversation if that wasn't clear. And then the other thing is, on Workday, I think Mike did a really good job of answering that question.

It goes right down to signature authority. So Workday, people can't sign for things that they're not allowed to sign for. So, directors have certain authorities, and then after that, it goes to me. And so invoices that go over a certain amount get kicked up all the way to me. They have to be approved before they go to you. So there I think Workday has done a lot to make us a lot more efficient. I used to have to sign off on all those things by hand, and now I'm able to do with a click of a button. So I think that's been pretty amazing.

K.

Alright. And maybe stay on the screen there, Jay. And, Mike, were you gonna tee this up at all, or are we handing this straight over to Jay?

Well, I can certainly tee it up and hand it over. Okay. As you know, it's getting into late May, and so we've been working, especially the budget team, putting a lot of time in preparing for the 2027 budget and building the process. And so Jay is going to talk with you a bit about the process we're proposing. We've made some changes this year, as we mentioned, based on feedback from the executive team at the retreat we had in March.

I'm really excited about it. I think it's going to be, you know we've seen that we're bringing quarterly financial reports to the full council. We'll continue doing that. We're also more involved not with the executive team as a whole. So Jay, I'll present on it. We'll be happy to answer any questions as we go through. So keep it away, Jay.

Thanks, Mike. Appreciate that introduction. So, yeah, I mean, everything Mike said and then some. Right? This is an early kickoff to the budget process. One of the things that we started to do last year that council asked for was us to just start conversations around budget earlier in the year. So we're here just kind of an early budget kickoff. Wanna do a couple things with this item. One, as Mike mentioned, I wanna talk a bit about some changes that we've made to our processes that inform the budget process. And then two, your next and we're gonna get some feedback from the council on things of interest to you for the finance committee.

And then the item that comes right after this is is year end and kinda how we're closing out 2025, and that really sets the stage for how we move into the 2027 budget. So with that, Casey, go ahead and move the next slide. Just in terms of, topics for tonight oh, I think I went one too far. There is. We're gonna talk about some process updates that Mike mentioned, in terms of the budget review, some some process highlights, how we're gonna handle enhancements, and I'll define that a bit as we move through this.

And then we'll talk with you some, things that you might want us to consider early in the budget process. Go ahead, Casey. So the biggest change, which really doesn't affect the council, it's really an internal process that I use. So we've been using the same budget review process, boy, for fifteen years or more. It's something I inherited from my predecessor and continue to use.

And it's a process where we form a smaller budget review team, which is really me, the assistant city managers, the finance director, the budget team, and then I rotate an executive team member through it every year. And that small team meets then in August. All the departments come before that team and present their budgets to that budget review team, including their requests for new budgets and all the all of that information. And then that that smaller budget review team then makes all the decisions that makes their way to the council as in terms of recommendations that the city manager has to you. What we're gonna change is rather than continue to do it in small team, we're gonna do a lot of this budget review as the larger, executive team.

We Mike mentioned, we just had a retreat with the executive team, and one of the things that they really want to do is be more engaged in the budget process with me and with you moving forward. So we're still gonna have a smaller budget review team because I've I've got to do the nuts and bolts kinda behind the scenes. But in terms of working through kind of the, additions to the budget, the decisions the decisions that I make around balancing, we're gonna do that work as part of the larger executive team so that they all are more in the know. They're more connected to it, especially the decisions that I'm having to make. And, quite frankly, it allows us to prioritize the work a little bit more, having more voices in the room to make sure that we've got a solid recommendation to the council.

So we're gonna do that work during our executive team meetings. All the rates and fees and the internal fees that we have to go through, we're still gonna do that work in August. And then that work will come to the finance committee. And then the one thing that came up is that the when the department directors come in August, they they tend to bring their whole management team, and there's a presentation. And they talk about the the the the progress they're making, the things they're proud of.

And one of things we talked about is if we do this with a larger team, then we're missing out on that. So what we're gonna do is we're gonna change up our processes through our executive team meetings and throughout the year, every month, we're gonna have a different department work their way through the executive team to highlight the things that they're proud of, their accomplishments. So that there's still an audience for that, but the larger team gets connected to that work and not just the smaller team. So again, I see this as a real process improvement to bring some more voices, to the table and to have more of my department directors in the no round budget and the decisions that are being made. So I think this is a a real good change to the process.

And I think we've got some other slides about some other changes I'm gonna make too. But I'll pause there and see if there's any questions on kind of this change that we're making and kinda why we're making it.

Ellie's nodding her head. No. And I am just grateful for more eyes and more brains involved along the way, and and I also think more transparency across the city organization. Thank you.

You're welcome. Okay. Go ahead, Casey. And then, you know, we have the calendar that was in your packet. You know, one of the couple things I'll highlight that from what I just talked about is you'll see we just had a a budget meeting with the executive team where we laid out a new process, and we're gonna start that process on May 28. So enhancements is a part of our budget process where department directors that have a need. So there may be, a new program that, needs to be delivered. There may be a personnel issue that needs to be addressed. There may there may be a stress or a strain on the department that needs more resources. And council sees these every year.

We bring them forward and and their request for new dollars. So it's outside of their baseline. It's new dollars. And, again, I used to do that in a smaller team. And and, really, at the end of the day, I made the decisions on, how to prioritize the ones that came forward to council based on council input and the kind of priority.

What we're gonna do differently this year is we're gonna I'm asking all the department directors to bring those requests for new budgets, if they have any, to a meeting on May 28, and we're gonna prioritize them together. So we're gonna work through a a process together that's facilitated, that gets all the ideas on the table. And then my plan here that I've worked with the e team is that rather than bring five or six or seven priorities to the council, we're gonna try to prioritize them down to the top two or three or four. Now council, at the end of the day, when I come in June, that study session on June 9, I'm gonna show you all of the needs that were expressed. But rather than working in a again, in a small team to decide which ones we get prioritized to go to counsel, we're gonna work as a larger team.

We're gonna make decisions together. That way, everyone's in the know of the decisions that we've made, and we're, again, all on the same page as one combined department director team on what we're gonna move forward with the council. So, again, I think this is a real big process improvement to to hear that allows us to bring things to the council that have had a lot more conversation and buy in across departments. So that's just a couple things I wanted to to to note on this calendar. The rest of it here kinda follows its way through.

We already kicked off the capital facilities planning process, so departments are gonna be hard at work, on that. You'll start to see that in August for the first time. Again, I'll be a council on June 9 for a a kind of a more formal budget kickoff with the council a little earlier than we normally have done it. And then you'll kinda see we we get into August and October, and then go ahead, Casey. And we kinda get into our normal budget groove heading towards a final study session with the council in early December, and then first and second reading budget adoption on the eighth and fifteenth. So Mike, Joan, others, anything you wanna add to the calendar conversation I just just had there?

Well, I think you covered it well. I think it's exciting to just have this new involvement. They're more from, you know, the learning of executive team in it too, so they really feel a part of it. It would be great.

Any questions from the committee?

Thank you, Okay.

I'm going through the process last year. Not having done it another way. I felt like we have plenty of information by the time

we got to really the harder decisions and discussions around budget, so I appreciate a lot of that to be carried on.

And I I think we're counsel's seeing a little bit earlier, and the the directors together as an executive team are narrowing their requests a little earlier in the year. So I it also will make joke happier if we really finish by the beginning of December rather than finishing on the last possible moment. Well,

yeah. I mean, you know, Jones used to have in the enhancements all in by July so that she's processing by August. And I think I kinda blew Jones' mind this year, and I said, no. We're gonna do it May, Joan, and you're gonna know what they are by June. So So we're gonna be a whole couple months ahead.

Okay. Moving on?

Yes, please.

Okay. The other thing, again, you'll see a a theme here, which is some more engagement with the executive team around items that normally they haven't been. Another one is we presented to the finance committee, I think, last month around the items that I pay attention to on a quarterly basis, kinda what I pay attention to on the budget. They asked to be part of those reviews. So rather than do them in a small group now, we're gonna do them at the at the executive team level.

In fact, we just did the first quarter two meetings ago, think it was. Mike and Joan came and did the quarterly budget update for the entire department group of department directors. So we're gonna continue that process. So again, they're more tied in to what I'm seeing, what you're seeing, the stress points on the budget. And again, we're working closer as a team to resolve the issues that we see.

They're also gonna as part of them being more involved in the budget process, they're gonna be presented the year end numbers, the revenue outlooks, the assumptions that we're gonna use for the budget. So all that's gonna work its way through department directors as part of making its way to the council. So, again, we can continue to refine it as we go along. So and I talked about enhancements. So again, just some additional process changes that we're making.

And again, I just really want more transparency with the department directors around kind of decisions that we're making, that I'm making, and more of their input into that process. They're asking for that. I value that. I think you value that. So I I think these changes are are just really positive, and I'm grateful to the directors for kind of speaking up about this when we had a retreat about when I asked them where do they wanna get more engaged across the board. They wanna get more engaged in the budget. They wanna help me and they wanna help you be be more successful. So I'm really appreciative of of their work and their willingness to dig in here. So, again, I'll stop there and see if there are any questions.

Well, Kelly, Sage, thanks for questions that are be answered on the next slide. So maybe we should see.

Stop waiting when fate is left.

Okay. Yeah. So so budget enhancements, I kinda mentioned this. So the direction that I give all departments when they're preparing their budgets is to do is to prepare a baseline budget with no increases, to stay within the bud the past budget they have. Now, what happens is payroll as you know is gonna go up because of inflation and and different costs are gonna up there outside of their control.

So things are outside of their control go into the baseline. Anything that we have control over, they have to get permission to add it to the budget, and all of those come through a process which we call an enhancement request. So if the utilities have to respond to some new regulation and to respond to that new regulation, they have to add an FTE. And you've seen that in some budgets along the way. They have to submit an enhancement request that says, hey, here's a new regulation.

In order to meet that regulation, I gotta hire an FTE. And then if there's a revenue offset, they present that. So like utilities, for example, can raise rates to cover that cost and they present it. General fund's different. General fund, there typically isn't a revenue offset.

Sometimes there are. If if there's a for example, if, Pamela is a good example. If she has a Civic Spark Fellow and she wants to add an FTE, but she's getting money from the federal government to cover it, She puts it in as an enhancement so I can see it as a new addition to the budget, but I can see that it has a revenue offset. And then any of the ones that come in that do not have a revenue offset, those are the ones that need a lot more conversation. Because at the end of the day, if we're adding to the budget, we gotta figure out where the money's gonna come from or how we're gonna balance to get there.

And those are the conversations that I end up having with counsel along the way. Some of the things that get added in here too is and we're gonna we're gonna jump to you in a minute. There are things that the council's interested in having conversations around the budget. And we lump those into this conversation around enhancement as we prioritize what makes what makes its way to the council. Not everything that's submitted by the apartments makes its way to you. I try to prioritize and work with the department directors to prioritize. As you all know, I have lots of conversations and one on ones along the way about what I'm seeing and what I'm hearing. We'll have early conversations along the way. On June 9, you're gonna see the full list, so you'll have a chance to ask questions about, hey, Jay. Why wasn't this one included?

Why are you not considering this one? Why are you only considering this one? Happy to answer those questions when we get there on the ninth. But that's really what an enhancement is, and and and it's a request for new money that goes through a pretty rigorous screening process, including, at the end of the day, to be approved by counsel. So again, I'll stop and see if Mike or Joan or others wanna add anything to that or if you have questions.

I think just as now granted, this is my first time through the whole process, but one thing I think I heard from YT is people submitted a pretty rigorous form for every enhancement. And James work here is to try to focus it down. So we're gonna capture the list with EP on the twenty eighth. So so you would have the magnitude of what the need is for the city, but then people won't have to do that more lengthy form on all of those. It just it'll be more on focus areas that are agreed to. Does that kind of summarize that, Jenny? Yep.

Yep. We're also trying to get more efficient and work in a different process for this and and doing it earlier. So I have a a much earlier look. In the past processes, I didn't see these enhancement requests till August when I started sitting down with the with the budget review team and they were I'd get 20 of them, and I'd go through them with the budget review team and I'd ask department directors about them when they came for their their presentations. And then I would then go through a process with the budget review team to figure out which are the ones that we wanna say yes to and bring to the council.

So we're gonna back that up and do all that. We're gonna start that work in May and finish it in June so that council can see those much earlier in the process and provide input much earlier in the process. For example, if there's one that you don't agree with or one that I didn't prioritize on the list that you think needs to be. So we'll bring all those to you for and I'm, to the finance committee much earlier than we have in the past.

Kelly has her question, and I'll go on this slide.

I've got three questions.

Okay. So,

Mike, you just mentioned focus areas, and that was kind of one of my questions is when the e team talks about these, how do they decide what those focus areas are? Does it align with comprehensive plan? Does it align with, like, learning and are those agreed on before you start looking at individual requests?

Jake, you wanna follow-up with that?

Yeah. So so the form they fill out that Joan mentioned, it they have to tie it back to a comp plan item. They have to tie it back to I just I had a brain freeze here. So a comp plan item has to be or community survey has to respond to maybe a community survey priority. It has to be a priority that's expressed by the council, maybe something that came through a finance committee discussion.

Or it's it's responding to some new regulation or new change in the law that requires us to do something differently. So in order for them to submit an enhancement, they have to go through that process. And then I use that to cull them down to make decisions. So for example, if it's if it's not advancing a comp plan item, then I'm gonna ask questions about why we're doing it and why they're asking for it. If it's not required by some new law or regulation, then I'm asking questions about about why we need why why we might need it. If it's not responding to kind of community priorities, then we have a conversation about what that is and why it's needed. So that's kind of the process that we go through, but it's all it's kind of all those things, council member Green.

Okay. Thank you. That really helps. Second question is, this this sounds all well and lovely in the event that there is money to add enhancements. How does it go if all signs point to start a baseline, but then we have to go down?

Yeah. So it's easier, obviously, when there's revenues. Right? When when they're utility related or they're related to some other revenue, it's a much easier conversation to to move them forward. When they're not, if we if there's no other way but to do it, then we have to make a reduction somewhere else. And part of this is me working through that process and it with the department directors to say, hey. If we have to add this here and we have no extra revenue, how else can we get there? And so we work that along the way against part of bringing it forward to the council.

Okay. And then last question. While I appreciate how early in the year some of these conversations start, like like I'm hearing you say May around some of these enhancement, the reality is I imagine there's department managers who don't know until August or September that, hey, this this summer didn't go as we expected or we need another thing here, or how how do you accommodate those of the things you just don't know in May or that a department manager might not know that early that, ideally, they're gonna need for this the next year?

I appreciate that. You know, this will be the first year that we've done this early, and so I appreciate that question. The way I always answer that question is until council approves the budget, we've got time to change anything. Right? So we'll take an early look at this in May and and come up with a preliminary priority. We'll look again in August all along the way. And if things change along the way, we'll have a process for department directors to bring those up to me and to the group. And then if we have to make changes or revisions to kind of what we've shared with counsel, we'll make them all along the way.

I just put on one of the things I've been thinking about is that this you know, having the executive team meet and narrow it, it's it's as counsel, we have to trust that that greater collaboration is gonna give us a good short list of items because it is different model from throwing the red meat on the table and having all the departments fight over it and and having a more political sort of decision making. This is more rational, in line, I think, with our priority based budgeting, our community surveys efforts we've done to be more intentional. But I I also think it it brings an additional responsibility for council, and and that's the reason for our earlier involvement and these new tools, new new reports to consider. Because I think we'll want to be make sure to put our eyes on as good trustees through the the process. So I I'm I'm very optimistic about it, but I also feel more responsibility to watch in a different decision making model.

100%. And I appreciate that comment. And as I mentioned, you'll see everything that's brought to my attention. So, you know, I'll bring the entire list, and then I'll work you through kinda how we as as department directors prioritize them. The other really good thing about having us all come together is it's really important to hear for everyone else to hear the conversation.

Right? For if police is asking for something, it's important for the other department directors to hear the conversation that the chief is having with me and with the larger group. Because that that might get them to say, you know, that item is much more important for us to move forward as a city than is this item that I was potentially gonna bring forward. So I'm hoping that that's how the conversation goes. It allows, again, for us to make decisions together collectively. And so it's not meat on the table, but it's again, it's a it's a process where we can all talk together and come to some conclusions.

Great. And for vegetarians, maybe, you know, that's all those fancy spices that are on the table. Right? Yeah. Don't wanna leave anybody up.

I love me some asparagus, so it's a it can be asparagus on the table too.

Yes.

Alright. Is there another slide after this? Where are you at? Yes. There is.

Yeah. So, as part of this, we thought we would just take a minute. And, again, if if you don't if you don't think of anything today, that's okay. We'll check-in again. But we thought we might take an early check-in to say, is there anything that's on your mind that that's coming to light for you that you want us to start thinking about early in the budget process? Doesn't have to be something that needs to be funded. It could just be a question that you have or something that you're really gonna be interested in, just so we make sure that as we start the budget process, that we're focused on anything that's that's on your mind. So we just wanna take some time just to to check-in with you.

I have nothing in the hopper, but I have every confidence that if something, you know, comes up for me throughout this

crisis, I'm not afraid to ask.

And I'm I'm just anxious to continue to work with our Power BI tools that give us more real time insight and and to watch this process. And it's really for me, it's all with an eye that along with the next with the next agenda item, we're gonna talk about how how it looks like we're closing out last year. Because for me, one specific area I wanna keep considering is opportunities for additional revenue.

I will say that, you know, we've done a lot of hard work on the budget over the last two years in particular to close a significant budget. It doesn't mean our work is done. Costs are still going up at a rate that that are higher than inflation. Inflation is hovering over three right now. So that's definitely gonna affect our budget for 2027. If it if it remains there, I think it will. All all points all signs point to that. So I think we've got another challenging budget. They're all challenging. I I don't think I'd ever say we have an easy budget.

I think these are difficult, always because we're balancing lots of community need with limited resources. But I'm again, I'm looking forward to the the budgets also are processed to really engage the council and the community. It's it's how we tell our story about what we're doing. We've made a lot of changes around priority based budgeting and our levels of transparency, so I'm excited for all of that and just to start digging in.

Great. Great.

I think that's it.

Well, we should thank you and release you to go back to your other work.

Well, thank you. I'm gonna hang out for the year end conversation, but I think, Mike and Joan are gonna lead in. But I'll I'll be here in the background.

Thank you, Jay.

Thank you. Appreciate y'all.

Finance director Mike Gibbons. Let's talk about the preliminary preliminary oh, Joan. Joan. I'm sorry. I love that. You're keeping me

on your toes. Okay? Okay.

So we started 2025 with the beginning fund balance of 19.4, and that we had revenues come in at a 114. These are the nice. And the expenditures of money. So we did send about 4,000,000 $44,700,000 more than what we brought in, but we were using some balance that was for some BLS and other other things that we were standing up. The '26 budget is balanced revenue expenditure, so a fund balance of two point about 2.5 of reserve.

Now there are some pending items.

About 2.5 words?

She wanted you mad. I didn't put the total on it because it seemed better to have the number. Okay. Yeah. Anyway, so in your June 2 council agenda on consensus, there is some carryover and budget amendment request for the first quarter.

And so those items, like, half 1,000,000 of it is for purchase orders where we've already made the paperwork that was in '25, and it just started over to the '26. And then we have a couple of little projects, like the Artesia Comens project, and there's a downtown vacancy project that are still ongoing that were started in 'twenty five just needed to be completed. And so those dollars are carryover requests so that that work can get completed. And then we did have a little bit of little bit of funding for budget amendment requests that some do have revenue offsets. And so it is spelled out really fairly in the work June 2.

Any questions on that?

My question, and maybe you're gonna say this is gonna be June 2, but I would love a little bit of a preview, that Plum Street deficit, that feels like a really big delta from the last time we talked about Plum Street proceeds. I don't know if

the city manager You want me to start, Jay? Because we got a little information today, and I don't know if Jay heard this. We've been so this is an estimate, as you know, to really get some things stood up at Thurston County that we were committed to in the ILA and also some things that need to happen at the city since we won't have the Justice Center area anymore. One of those big questions has been the amount that we agreed to in the ILA for tenant improvements was a large number. We really wouldn't know until Princeton County completed some of that work.

So we got some information today from both Randy Peters, the court executive officer and the assistant county manager, that they're almost done with that work, and the tenant improvements will be less than what we had anticipated. So we're when we as Joan said, when we're doing this, we're that full amount with the hopes that and I think what I'm saying here is it sounds like we're gonna be under that. We wanna give you the picture of it. If we have to spend all that, then that's where it is. So a portion of that million dollar spend deficit for us for those tenant improvements.

There's some other things. I don't need to say we're saving the whole amount, but it looks like on the tenant improvement on practice won't need that. So it'll be a little bit better off there or a little bit better if it's so does that help answer that? I

can add some there too if you like, Mike.

Please.

Yeah. So, you know, when we did all of our estimates for all the moves associated with Plum Street, so to move everything off that site, Fran, our former city engineer who we pulled out of retirement, thank you, Fran, to help us work this project, did a whole bunch of early estimates based on the proceeds that were coming in from the sale and the cost to relocate all the services. And the reality is just over the last couple of years as we work through this, costs are up. So, she did her best to be conservative estimates, but price and materials, cost of things are just up. So when we look at the cost of things that are up with our transition to the county in terms of tenant improvements and getting the final cost from them, and then the cost of all the materials to, for example, build out the office space in City Hall for prosecution.

We acquired some property. We've got to build out a parking lot for well, secured parking for OPD and evidence storage. Those costs are just up, are for materials and other things. And so that's all those things are what's accounted for in this funding deficit.

Okay. I I appreciate that clarity.

I guess I would just ask.

I mean, it's it's disappointing because I I feel like what I remember from our conversations last year was that, you know, a lot of what we saw presented was was basically a a net zero. So that feels like a big change from a net zero. And I and I recognize why. I guess my ask would be when it comes to the full council in June that along with, you know, what it's actually costing, we also get to see or reminded of what the the hope was just so we can see where those changes were.

Absolutely. And and some of them aren't aren't totally known yet. So, again, we're being as Mike said, we're we're being conservative here. You're not gonna see, in in June, a million dollars come off, your fund balance. This is gonna be kinda overtime as we spend this out. Even some of that final construction could I'm hoping comes in lower. So as soon as we kinda have more certainty around this number, we'll bring those updates to the council. But I wanna be, again, be conservative, put this on your radar for now that if it if it's true and they're at this level, there there's only one place they can come from, and that's our that's our our fund balance.

Have we been at, at 10% down to the 10%, or have we been in recent years, have we gone cleared out to 10% from the service?

I haven't gone back and looked. I know that we're usually about 12 to 13%. Mhmm. But then with budget amendments throughout the year, I'm sure we've gone down probably right to about 10%.

So it's not new or unusual to look at. Because I know we've we've had the hope of building it up and holding a reserve larger than our minimum.

It's true.

So

Go ahead. Yeah. We've been working to try to build a reserve above the 10, for things just like this that come up. So, you know, it's it's good to be above 10% so that when we have an unexpected thing like cost overruns, we have a place for it to go. I'm grateful right now for the work done by the council and by the team to have this 2.5 above our 10% because we can draw from that.

That's the good news. The bad news is we're drawn from it, and the the more you draw from it, it's one time money that's not there anymore. So over time, it's something we're gonna pay attention to. I think I've mentioned this to council council members may know. Council member Gilman's been around a while to know that for many years, we only had a 10% reserve. And our year end conversations were about, hey, what do we have above that? And what do we have to spend it on? And we've kinda changed that practice of that, and we've been holding on to those monies and and for these special kinds of things and emergencies that come up. So again, I'm grateful that we're here, that we have it. But it using any of it also is difficult.

And just if if I can give my simplistic look at the whole page that we spent about 4,000,000 more than we took in in revenue, but we're about two and a half over in our reserve. So we're darn close to both coming in at our budget and of of having a revenue and expenditure balance. That's that's really and this is this is specifically for the general fund. So the is there a wrap up of all of the city money, or are they just or is it too different to consider other big pots combined?

It's two different to wrap them all together. So drinking water has got 25% reserve, So, you know, the other stuff that they can just increase, easily offset, and build

a resource for general purpose.

And so that is why we do such a close eye on, you know, really hone it on the general plan.

And

if I could just add that, Kemper's master reserve is really in you know, a good amount of our revenue comes from property taxes in the general fund. Those come twice a year. So those in between periods, it's really also that balance. It's in our account, so we're spending on it. We build it back up now that we've gotten this first half property tax payment in, but that's, you know, getting that's the minimum really we can be comfortable. And that's why it's based on a percentage of

Or, I mean, there's different cash flows. It doesn't mean we don't have our 10% reserve during this this time since. We track the cash flow

very carefully, yes, daily. Some of us do, which you should be happy about. But at any rate, that I just wanna emphasize that, you know, it's not just sitting always with $12,100,000 in the bank. It's a Because if we didn't have that, we'd have to do short term borrowing in interest. That's something, you know, some cities have had to do with these times of the there, so we don't wanna be there. That's why we keep that as a minimum. It's also there for emergencies, of course, that we can bring the council up. Just to remind you that that's it's it's a big part of the

cash flow that we do.

Let me put that number in perspective a little bit. A $12,000,000 reserve. What's average monthly payroll?

5,000,000. Just the payroll. Just the paying the employees and then the associated cost, of course, taking over that. Sure.

So in, like, absolute apocalypse scenario, money is coming in at all.

That would get the signature a couple of months.

Just payroll. Right? Because we have other required obligations to lock. You know, it's coming in this is general fund that Joan Joan pointed out. So we have revenue coming in, but it's a complex Sure. You know, system to make sure that we have adequate, which I guess, more than anything simplistically. Yeah. And and that, quite frankly,

I do it all the

time because I'll say to the accountant, you know, under Kimsey's team, I'll say, okay. We've got a 2,500,000 payroll this Friday. You know? Okay. Here's what we've got in checking. And right now, in all fairness, we just first have property tax in. So we're actually putting you know, we're investing some money so we can build up some interest or anything as well. But when you're looking at those months, say, January, February, March, that that's when this is being drawn down some so that we can make those payments. You know? We don't always know, and maybe a big construction project bill is in.

We may be getting grant reimbursement, but we have to front the payment and then file for the reimbursement. So it's it's pretty complex system to make sure that we're monitoring that to make sure that we can keep those obligations in a timely manner. I mean, we have to on some basis. We can't tell the employees, well, we'll catch you on the damn thing. You know, skip one.

That's just not how it works, and we have to be able to make the payments to join animal services. It's a lot of all those agreements that we have to the family support services. So that's what we're tracking in that 10 that minimum of 10% is really, you know, ideally. If you ask me, well, what would you like to have as a finance director? I'm probably gonna tell you 25%, but that's not gonna be realistic given the circumstances, Grant.

But I think our citizens can feel assured also as well as our employees that we carefully manage this to make sure that we have what we need, what we need it. And we're not going in this short term borrowing situation I mentioned to take out notes to be there, you know, until we get our results cash. That's not a good way to have to do it. One

more thing here.

Go ahead, Jake.

Yeah. So there's also, on the other side, you can see it. I think John may have mentioned that, but there's a kind of thing to say other items. One is we have a significant, workers' comp pension claim, that we're tracking. We think that that can get paid out over time, not as a lump sum. So so we're tracking it. But, if we had to pay it lump sum, that would come out of fund balance. But right now, I think the preliminary, what we're hearing is we can pay that over time, and we can just kind of adjust workers' comp rates over the next kind of, twenty years or so as we pay that out. We always we're looking for some way to kinda move, cleanups around the jungle forward. We're kicking some things around at a at a partnership level regionally on that one.

And then this the other one's a positive. We made a decision to continue to lease some additional OPD vehicles. That saved us $400,000 this year. So that's a positive change that we made to this year's budget that hopefully if we can continue on the on the positive trend with revenues, we'll hold on to that, and that'll then add right back into fund balance at the end of the year.

That's the rather than purchasing, we're leasing. So we're spreading the cost out over multiple years rather than paying right now. So

Yeah. Yeah. And so by leasing so when you when we buy a vehicle and departments, they pay into a fund enough to then buy the vehicles again when they need to be replaced. When we lease, there's a lump sum of money that was set aside to buy, and we're able to pull that lump sum out of the fleet fund and then put it into fund balance and hold on to it, and then we lease. And so it's a it's something we're looking at at OPD over the long term. It's as council member, we made some decisions around leasing as part of balancing the 2026 budget. And when the chief came to me with some additional vehicles that need to be replaced, we made a decision to lease and save the money.

So it's a a onetime?

Yep. It's onetime.

Well, I appreciate taking this early look. And I realize that there can always still be things pending and adjustments beginning, but is there a point when you consider the previous year closed out? When would that When the audit is complete. After the audit? Okay. Yeah. Live and learn.

Alright. So once the audit's complete, any adjustments that we have to make to to, you know, use it like, cover early then, then that's when the the best we can finalize and make the the real number. We feel these pretty confident in these numbers, And so that's why we're really good forward. We don't expect much.

You. Thank you. Anything else, city manager Bernie?

Maybe just one other quick fine points. Even on the the carryovers, some of those costs could come in lower. You know, again, we I always ask the parts to be conservative in what they may need. So I'm hoping some of those costs come in lower. I do believe Plum Street's gonna come in lower than what we have there. And again, as that finalizes up, we'll bring all that information before the council so we can square up with you to council member Green's question kind of what we thought we were gonna spend and kind of where do we see the increases, where they came from, and and we'll we'll share all that with you. But, again, my hope is that we're we're we're really conservative with these numbers that are in front of you, and they're gonna get better over the coming months.

Thank you. Anything else, Kelly? No. We will move on to the next item on the agenda 16, and we could invite Laura and Tammy to come up. And we'd like all three to come up. Okay. Great. We've got three chairs.

We'll sit with you every day.

Arts director. So buff. I see we have welcome, John. I see we have our consultant. Thank you.

Well, great. I am Laura Kegan. I'm the director of parts planning and payments for the record. And wanted to take a minute just to introduce why we're here and who we have joining us remotely. We're here tonight because recently, the state legislature passed some new legislation that requires municipalities to collect park impact fees to change their methodology.

And John will go into the details of the methodology change and what that looks like for urban park impact fees. And so John Villarducci is a principal at FCS Group. And, also, I think joining him is Luke Nelson. He's a senior analyst with FCS Group, and they've both been working on the methodology change for our heart and neck disease and are ready to present a presentation of those.

That's right. Thank you. And thank you, Casey. Thank you, committee members. So, you can go to the next slide, please.

The way that we set this up, I'll just do a little bit of background on impact fees, which most of you will be familiar with, touch on the statute, the RCW, and the recent changes that Laura mentioned, and then we'll get right into our scaling methodology and talk about what that what that result is and what what options there are going forward. We have some comparative information to share with you as well. Next slide, please. So a few of the key characteristics of impact fees. These, as you know, are the the one time fees paid at the time of development.

Redevelopment, sometimes if they are increasing their demand or impact on your systems. But generally, these are these are charges on on new development and not ongoing rates. The law provides impact fees for streets, parks, schools, and fire protection. We are talking about parks tonight. Impact fees can only be used for, capital projects, and we calculate them based on the cost of of capital and infrastructure.

They can include both an existing buy in piece if there is extra capacity available for growth in the system that's already been built. But mostly, they're about planned facilities. What what has, what is in the plan for growth to provide parks capacity for new users. And then finally, they're intended to represent a share of system facilities and not not local facilities. So not the not the park at not the pocket park associated with a residential development, but a share of of larger system facilities.

Next slide, please. So we we this is just a very high level summary of the sections of the RCW that deal with impact fees. We we know them we know them well. The the reason we're here tonight is because of the the language at 820206 o. Slide, please.

And this this red highlighted language is the language that requires scaling and and Laura mentioned it. The schedule shall reflect the proportionate impact of new housing units, including multifamily and condominium units based on the square footage, number of bedrooms, or trips generated in a housing unit in order to produce a proportionately lower impact fee for smaller housing units. So what you'll see tonight is a methodology that scales the park impact fee by square footage, and that's because we have really good, data that shows the correlation between dwelling unit square footage and the number of occupants on average, and the number of occupants generally, equals park demand or park usage. So this language was was introduced in 2023. There's some companion language on the, next slide, please, which the and this this is language that the city has already updated its code to include.

It has to do with accessory dwelling units. You can't charge more than half of the charge, what the charge would be to the principal unit for an accessory dwelling unit. So we'll we'll mention that one other time, but that's really not what what this work was about. That's that's an update that the city has already made. Slide, please.

So this is the city's current park impact fee schedule. It varies by the type of dwelling unit, which is generally linked to the average occupancy for those dwelling unit types. Single family residence, six thousand nine ninety five is by far and away the most often charged impact fee. So that that's just to set the stage. The fees, the the scaling that we will show you is intended to be revenue neutral.

So the idea is that it will generate going forward the same amount of revenue as your existing fee schedule would. Next slide, please. So there there are a couple of of key steps in in the scaling process or methodology, and and the the key numbers are at the top of this table. The first thing we do is we take your schedule of impact fees by dwelling unit type and we look at housing stock. So all the different types of dwelling units that exist in the city now, and we are able to use that to calculate a blended or weighted average impact fee per dwelling unit regardless of the type.

And that's that $6,005.35 and 26¢. We've also researched the average number of occupants per dwelling unit regardless of type in the city of Olympia, that's two point o five, and the average size in square feet in in livable square feet per dwelling unit in the city of Olympia, $1,006.66. So given those different numbers, we're able to calculate an impact fee per occupant. That's the $6,005.35 divided by two point o five occupants on average. And we'll come back and show you why that why that's an important number.

And then the really important number, impact fee per square foot of $3.92. So that's simply the blended impact fee divided by the average size per DU. So our proposed impact fee for scaling purposes is that $3.92 per square foot. The interesting thing about this approach is we're also, able to calculate a floor and a ceiling for the fee. So that minimum fee that you see there of $3,001.87 and 93¢, that's the impact fee at the dwelling unit size where on average one occupant will be served.

One occupant will live there, one occupant will be served. So that's that's the minimum fee and that dwelling unit size is 813 square feet. The maximum dwelling unit size, so the ceiling for the charge at which that charge will flatten out and go no higher, is at 3,500 square feet and that maximum corresponding fee, $13,720 per dwelling unit. That ceiling, is a result of, some really interesting data that we have from the region, and this is common no matter where you look. After a certain point, the correlation between the number of occupants and the size of the dwelling unit flattens out, and you're no longer able to say with confidence that because that dwelling unit is larger, more people are living there.

So that that number is 3,500 square feet for the region. And so that's what sets the the maximum fee. Slide, please. So just to give you a sense of how this proposed approach would affect new dwelling units of different sizes. We're showing you, at in the blue there under the the city's existing impact fees, the charge would be, would be the same from 1,200 to 3,500 plus square feet.

That zero to 813 square feet is intended to represent a, an accessory dwelling unit, and then we're showing what the charge would be, under the new rates or the the new rate approach for each of those different sizes. Lower fee for the smaller dwelling units, higher fee for the larger dwelling unit intended to be revenue neutral going forward. Next slide, please. So this is the data that that I was talking about. We have it for the Seattle Metro Area.

We've got it for the Portland Metro Area. And, so what what we're using is what what we believe would be most applicable, in the city of Olympia that just shows where that curve flattens out, and, we no longer can tell, we no longer have a strong correlation between the number of occupants and the, the dwelling unit size. Next slide, please. This is just a graphic representation of the floor and then how the the park impact fee would go up up to that 3,500 square foot level, and then, and then that would be the ceiling at a little less than 14,000, dollars, for for the dwelling unit. So this is a just a a repeat of the accessory dwelling unit language, which, as I mentioned, is already in city code, that that calculated fee is either is the lower of the size of the accessory dwelling unit or half of the fee that would be charged to the primary residence.

Next slide, please. So I I did mention, some comparables. What we're showing there is is the weighted average, park impact fee, for the city of Olympia after we take into account the different, types of housing stock and then a collection of and these aren't necessarily comparable to the city, but maybe cities of interest, some of them nearby and some, in the greater region. They're going up everywhere. We're we're, we're seeing some really high calculated fees and, a lot of cities not adopting the full, the full calculated fee for that reason.

Next slide please. So, think options going forward for the committee to recommend, I guess, accepting the new methodology as presented, asking staff to to prepare other other options. Having a bedroom based approach would probably be the the only, you know, relevant option. I don't think trip generation was intended for parks at all. I think that one was clearly intended for transportation, or or perhaps provide other other direction, going forward. And that's all of our prepared material.

You know what? You got anything else you wanted to add before we start for discussion?

The only thing I could say maybe that John did talk about it is in your staff report. Park impact fees are very important to the department. They help us finance guiding new park amenities to our parks, which we know the community is always requesting. And so there is a a short list of some of the recent projects that have been funded using park amenities. We use them as brand match or receiving competitive state grants to help with the development as well. So, yeah, just wanted to add a little bit

of context about what we're using.

So for things that we use the projects that from our parts plan update. We didn't we use that same nervous because we're just looking at the methodology. And when we update our first plan again, in a few years, we will have

Councilmember Green had asked me about Lacey having a zero and us being alongside the King County cities. And I we've had this discussion many times in my time on council, and I so I'm wondering if if there's somebody either here now or if when this comes before council, if we could explain sort of the total development fee costs for a single family house in Lacey on the ones here. Because I they've come out roughly equivalent even though when we do some of the individual apples together and individual oranges together, we charge differently. But at least over the last few years, it's tracked that the the total cost to permit and become a a new structure has has been about the same. So I just but I don't know if anybody's ready to talk about that now or if that's better to have Tim or somebody talk about

Yeah. We'll probably just talk about that. And then so that could be a little bit more challenging as far as that goes and also, you know, leverage match or branch. So so, yeah, the way that the Olympia is structured allows us to move the pools of service when it comes to the impact fees and then also at.

I

wondering is an excellent phrasing for for my questions. In our staff report, you talked about square footage. You used the phrase habitable. Is that like, what is that distinction? I mean, if I would get there, is the garage out? They let me how do we calculate that?

Garage out. Yeah.

Can John, I can take it because we looked into this. I talked to CP and D because they take those applications in over the counter. So what what is already being asked for so that we're not adding another request, honestly, onto the homeowner or the developers. And they already have a field on their applications that's called livable square footage for their residential applications, and that does not include garage space or accessory structures that are would be, like, buildings or sheds and that kind of thing. It includes the living space where, you know, occupants would be living.

So that's what we were proposing to use as the calculation. So it's probably smaller than their total, you know, building coverage footprint because it wouldn't include any garages or other accessory structures on the scene.

Okay. But it is

a known number that they already collect? Yes. Yeah. We it you probably noticed in the memo from FCSBirth, they said that is something that community, you know, municipalities are looking at, what do they already collect in determining, you know, to to choose whatever they already are collecting. So I think John has shared that some people are including garages in their calculation, but we already have a guild of a livable dwelling or, yeah, deplittable square footage.

So And my only other wondering is I would assume if if this is approved by full council, you wouldn't apply anything already in the pipeline. It would be things like projects that are coming in brand new. Or what's the Yeah. Cutoffs. So the our deadline for updating our methodology for the state law is June 30.

And so and the way we already have this in our code. So the somebody who's putting in residential can request a deferral. Most developers and building owners do. So they request their deferral when they put in their building permit application, and they're vested to the impact fees at that time. And it may take them I mean, if it's a larger development, it could take a year or more.

But they are vested to the the fees at the time. And the collection of the fees happens at occupancy permit. So that's the very end of the building. CP and T, they issue an occupancy permit, and that's when they the developer or homeowner pays the fees. Again, a good question. I assume somebody wouldn't wanna do a deferral if they are in a situation where their fee would be less. And I think that that's you know, I we would honor them being able to, you know, use the have the lower 80 of the two.

My my my carpenter had this space. So there's no the we call it heated space. But when you do a job for footage, you also only get paid for the heated part. They don't include it in the ready the garage built for free. So it's it's it's a sort of thing.

And and in terms of the the fees, there's a a long established dance that because our fees already changed periodically. We adjust both impact fees and our general general facilities charges and our permit fees. So there's some timing around that, and then there's building codes amendments, changes to that one. So they also try to time around which building code did you want the permit to be built under. So, anyhow, it's it's a long established negotiation that won't be unique to this shift, I don't think. I I'm wondering why we're considering parks separately if all three the the transportation and fire are also impacted by this legislation.

Fire does some collecting, transportation uses strips generated.

Okay. So they're they're they're in compliance.

So they'll use a they already use a different methodology that fits within this. Yep. And and because we don't assess a fire charge, we don't have to have the ordinance. Easy enough. Thank you.

So I I I'm I'm in support of of this structure. And one check that I wanted to make was what sort of the the breakeven compared to the existing single family, and it's at 1,700 and 85 they said 1,800 foot house would would would be the same impact fee charge as as it was as it is today. So I was just trying to get so and it and it looked like from John's chart that basically everybody under 1,500 feet is going to save a little, and that's we're trying to incentivize, but that's the intent of state legislations, to incentivize those smaller structures. And then everybody over 1,500 may well, or or over $17.85 will pay a a little bit more. Anyhow and I I also like, I always I'm always concerned about scale of these things, realizing that we're talking between 3 and $12,000 on a half 1,000,000 to a million dollar sort of construction.

But it's I realize it's an impact on the the cost of the project, but percentage wise, the the changes are not not profound. I think, you know, they're in the interest of fairness and some modest incentive, but it's not a big change in terms of the cost of building a structure or building putting additional residential roofs. That's a little self biopsy. Yeah. Support. Robert, welcome to the meeting. Yeah. You guys remember Ben

or cool? Yeah. This? Fine. Went all the way to the last minute.

Mhmm. And here you are. I am.

So you so you've come in and been waiting for the presentation, but did you come preloaded with any questions regarding about this?

I have a couple of thoughts. I've done I I I'm gonna assume that I'm

just gonna ask

anyway. How does, you know, how would this work under some of our new our upcoming changes around lot splitting and, like, the ADU situation? Let's say someone wanted the lot split in the ADU. If they did it out of the wrong order, would

they have to pay a

higher fee or lower? Like, they they built the ADU and then they lost splint. How would that or if they lost splint, then they built the ADU. You know what I mean? Would would that affect Yeah.

The the the the than you?

So you're saying if if there was a principal residence and an ADU on a lot, and then later they wanna divide that and make it two lots, so it's a principal and a principal, basically. We don't have a way to go, well, John, do you have any thoughts on this?

I I I don't. I mean, I think that so so if you split it and then the ADU became the principal unit and then there was they added an ADU, I suppose they could, you know, to to some degree, game it, but you'd be talking about small dwelling units anyway. I'm not I'm not sure. Yeah.

Well, and it's still based on the square footage.

Square footage.

I mean, there is that ADA provision that we went through where somebody might have gotten a little bit of a break there because they got the lesser of the 50% rule. But I don't think that the differential would be enough that we would be trying to go backwards in time and collect for that necessarily. But, yeah, the the code doesn't really talk about that specific situation. So Do I

ask just to clarify, you're wondering what the the difference between somebody building a house in an ADU and whether they split the lot ahead of time Mhmm. Or or that it was split at some future point in time. And I would say there's there's several incentives to building the ADU with the house on the same lot right now. We have discounts and and incentives across several kinds of fees. So you pay more in the total development cost if you split the lot first when you build because then you'd just be building two single family houses, if that's what you're wondering.

Yeah. Or then the existing home lot. Yeah. And they said and they're planning on splitting it, but they they are building it. Mhmm. And then they split it. Right? Like, right around the same time. You know? I just thinking the order of operations, what would be the best way

to do that? If you split it first, it's not an you it's it's two lots, and you're building a set you're building a house on the second plot. Interesting. Yeah. You don't get to recall an accessory to the primary house once you divide it a lot. Yeah. Yeah. So you're trying to game the system?

No. I'm just taking a taking a taking a my decision on the

No. Absolutely. So And and you said you had another

I mean, you already the other question was gonna answer around versus bedroom

sizes and square footage. How is that rule?

And, John, are you seeing other Western Washington cities pretty much adopting this same methodology?

Yes. Almost almost universally. We've worked with probably a a dozen, and, I think we've calculated the per bedroom approach in one or maybe two, but they've all gone with square footage. And I I think the main reason is that there there are ways to deal with this in code, but the thought is that the the square footage approach for one thing, we have the really good data that correlates occupancy with square footage. But the other thing is there's this this potential that you're gonna end up haggling about what's a bedroom and what's not a bedroom.

And that that that, you know, that's kind of a real a real thing. People may argue that it's a den, not a bedroom to try and avoid paying the impact fee. And so that that's been the the primary concern there. And

yeah. Any other questions or concerns?

Most of this is state law,

if I'm being honest.

Seriously, there's not a lot of flexibility. Right?

Yes, ma'am. We have to do something to create this sort of a this this sort of pattern in our impact piece. Yeah. Yeah. I mean, yeah, I'm totally in favor of this.

Do we need a motion? To formally accept it?

We need to. Okay.

I would move to recommend full council to accept the new methodology as presented. Second.

Alright. So any other discussion?

Is this gonna be an a item versus an item for a council? I

think we were planning to have a presentation. John, we'll be back. Great.

You would prefer that it's another business and has a presentation? Yeah. Yeah. Wonderful. Alright. All in favor of recommending the new park new park impact fee methodology to counsel, say aye. Aye. Aye. Alright. John, thank you very much for

Thank you. Evening.

Thank you very much.

Good night.

And team Parks, thank you for coming here. Director Gibbons, this brings us to reports and updates. Do have a report this evening? I'll just give

you a couple of updates. State audit has officially started. We've gone they've been really working on this now for a couple of weeks. The annual comprehensive financial report was sent to them on Monday and to what Joe was talking about earlier. Is really where they're auditing our financial statements.

If a discrepancy or they thought maybe we put some expenditure to another fund that along with the general fund is finding where we have a discussion and has might happen. But as I said, we don't anticipate anything. They'll be going through our financial statements and doing their careful audit. They look at things different, you know, different ways to make sure that how we're presenting our financial information matches. They have access to birthdays so that they can really look at things themselves.

They're also conducting the federal audit. So on our federal grants that we've received funds on, they're looking at that, and we follow the guidelines established in that. So that's underway in a way that a big process. They'll finish that financial and federal audit and then come in and do the accountability audit. Comes down.

So that's taking a bit of time. I the chair of the government also participated in a risk assessment call one on one with an auditor. I've done that as well as city manager, Bernie. So it's underway. Then just the other thing, we'll be bringing them that quarterly financial report both to the finance committee as well as to full council.

We'll be publishing it monthly on the website, but then doing that extra I think, just piece of transparency, not only for full council, but our community to have that called out. I think it'll also it would be beneficial as we move into budget. We think about, you know, kind of where the ending of that balance is and that that there's nothing different or or anything mysterious with our starting position is. We'll be putting a good amount of time in on the prep for the June 9 study session with a full council on really getting some of those preliminary estimates, again, the fund balance and what the enhancement picture is as we said, we want to make sure that we're documenting the full need of the city. Obviously, we can't get to your point.

We can't unfortunately fulfill all our announcements, you know, and how that works. So there's a lot of work always going on in the department, but that's my report for this Monday.

Thank you, Mike. Anything else? I just

wanted to let you know that April monthly report is up to New York City. Great.

Can see? I'm

sorry, Joan. Was I cutting you off?

No. That's it.

Great. Anything that we're gonna do over? Well, with no further business before us and the sun's still shining, we will adjourn at 06:09, and we'll meet again next month at the same time. Thank you all very much. Thank you.

Right on time?

I'm so happy. Wow.