City Council - workshop

Good evening. I'm calling to order this Redmond City Council study session held on Tuesday, July 28th, commencing at 7 p.m. All council members and Mayor Burney are in attendance. There are three items on tonight's agenda. The 2026 amendments, to Redmond Municipal Code 3.38, multifamily housing property tax exemption, a budget process update, including our rate utility study, long range financial strategy and fiscal policies, followed by council talk time. The first item on the agenda is the 2026 amendments to Redmond Municipal Code 3.38, multifamily housing property tax exemption. Carol Helen, Director of Planning and Community Development will introduce this item and her team, welcome.

Thank you so much, Council Member Stewart. The staff introduced this item at the June 16th, 2026 Committee of the Whole meeting, at which time the council members asked questions and asked to schedule this study session. And that's why we're here this evening. So responses to the questions that were asked as were part of your packet this evening, And I also sent an email earlier today, if those of you had an opportunity to read it, where we provided responses to additional questions that were raised. I'm joined tonight by Ian Lefcourt and Jeff Churchill, and I'm going to turn it over to Ian, and he's going to recap the proposed amendments.

Thank you, Carol. Hello, counsel. As introduced last month, the proposed amendments would add a 12-year extension option to our existing MFTE programs to three residential targeted areas, Marymoor, Mixed Use, and Overlake. The proposed amendments would not impact the downtown, faith, or neighborhood residential targeted areas. And importantly, this would be a tool on top of the existing MFTE programs. It would not replace any program. Based on a 2026 analysis conducted in partnership with the Regional Coalition for Housing, ARCH, these extensions will improve development feasibility. We conducted the MFTE program analysis in 2026 for two key reasons. The first is that we promised our development partners during the Redmond 2050 comprehensive plan update that we would. And two, there was a variety of different legislative items that came and offered different tools for the toolbox of local jurisdictions. IF ADOPTED THE 12-YEAR EXTENSION WOULD BE AVAILABLE TO QUALIFYING DEVELOPMENTS THIS YEAR. NOTABLY THE EXEMPTION DOES NOT TRIGGER UNTIL THE BUILDING IS COMPLETE AND HAS A CERTIFICATE OCCUPANCY THEN STARTS THE FOLLOWING YEAR. COUNCIL MEMBERS ASKED BACKGROUND QUESTIONS ABOUT THE MFTE PROGRAM AND ABOUT THE 2023 PILOT PROGRAM, RESPONSES TO WHICH ARE IN YOUR PACKET. In addition, as Carol noted, we sent out a collection of eight or so responses to council member Parsi's questions about the program. And tonight we are seeking council direction on the proposed amendment so that staff can prepare an ordinance for council action at a future business meeting. And with that, I turn it back to council president Stewart.

Thank you so much, Ian, director Helen and Jeff, much appreciated. Council, who has the first question or comment on this item? Council Member Pacquia.

Thank you for coming back to us with the matrix. I'm just looking at the first item, which was the question I raised on the 20 year option. And I'm looking at the last sentence that we didn't consider it because we want additional guidance by the State Department of Commerce or other legislative revisions. I was just wondering if you could provide more context on what guidance may be provided by the Department of Commerce. Just more clarification on that. Thank you.

Absolutely. So the different MFTE programs that are authorized in the revised code of Washington typically have baseline minimum requirements, both for the set aside of affordable units and for the levels of affordability. In some cases, like with the eight year baseline program, there is no set aside requirement for affordable housing at all. Part of the recent legislative package that implemented a 20 year Todd MFTE program The way that the language was written and organized into the existing code is such that we are not sure if local jurisdictions have the authority to adopt deeper levels of affordability, more stringent affordability requirements associated with that program. Notably, other MFTE programs do have the formatting in the language such that local jurisdictions are clearly authorized to adopt more stringent affordability requirements. Some folks interpret it one way, some folks the other way. Based on legal counsel and just the availability of our timeline, we do not need to adopt anything until the end of 2029. We felt it would be prudent to pause on this item and not say no, but just say not at this moment.

Thank you. Council Member Kritzer.

Follow-up question on that. really related related to some of the questions I appreciate the answers in the matrix that that I had asked her from because we've gotten some feedback around the 20 year. So in terms of the process if we wanted to adopt 20 year is there would there be a barrier to us doing that sooner than later, should we get the answers that we're seeking or do we have to wait till that 2029 timeline or. Could we, similar to this, bring new amendments?

We actually don't have to wait till the 2029 timeline. And we would, if it would help spur production, we'd actually like to get the 20-year program passed. Just to put a little, some additional context around what Ian said, which was a fantastic explanation, is that we actually will be in our legislative session looking for... a trailer amendment to clarify the legislation so that we can get consensus across all the cities. We are not the only city that is having concerns about this issue because Commerce has provided guidance that actually said, yes, you can go deeper. And we aligned our MFTE program with our inclusionary zoning requirements. The development community has said no you can't you have to do only what the state said as and So in an abundance of caution We didn't want to end up at the point of the spear because no one else was actually adopting their regulations yet And we didn't want to be the litigation test test case. So we're choosing to go back and get clarification from the legislature

Thank you, Director Helen. Council Member Forsyth.

Thank you. That makes sense because typically we operate under the we can do more restrictive, not less restrictive than the state law. So the further explanation helps answer that question for me. So I appreciate that. The only question I had was just a refresher. I know I've asked this question before about this program. Does the tax exemption apply to the entire project or just the units impacted? And I apologize. I know I've asked this before and I'm just not remembering.

It applies to all of the residential units, but only the assessed value of the improved property. So the baseline value of the land.

Not the land.

Not touched.

Okay, thank you. And not the mixed use components.

Council Member Soni. Thank you. I have a question regarding future. So, you know, suppose if we complete 12, eight or 12, and then another 12, then do we know what is going to be the staggering strategy? Because what if all these houses, they come back to the market rate all of a sudden, and can we prevent any of these things and can be, what would be a strategy and how can be well prepared for some of these things?

I understand correctly. We're talking about the affordable units that are integrated Well, the good news is the city of Redmond ensures that our affordable units remain affordable for the life of the project and this is notable It's something that Redmond does above and beyond in one of the many ways. We are a champion of equitable housing and importantly many other jurisdictions do exactly what you described where when the exemption ends and the affordability of the unit ends. That is not the case in Redmond. So the units will remain affordable for the life of the project.

I'll go first to Council Member Parsi who hasn't asked a question yet.

I just wanted to make sure that I understand the full kind of fiscal implications of this proposal. So if I understand correctly, the cost for the community would be about $45 annually per household. The amount of foregone taxes would be about $575,000. And this was a project that brought forward 258 affordable units in the past since it started in 2017. And I also see the total cost of this project listed in the memo as $5 million. I just wanted to better understand how does that $5 million come into play for this specific edition?

The $5 million in the memo, I believe what it says is that's a total cost of the community and economic development offer that supports all the staff time related to processing plan and code amendments. So that's just the staff cost, but it's not the cost of this specifically, it's the cost of everything that we do for that entire offer.

Thank you. We'll go to Council Member Forsyth and then Council Member Kritzer.

Just to follow up to Council Member Soni's question and appreciate the explanation that we still invest in the affordable housing after this program is no longer relevant to that project. I know that we have the language in the ordinance around people being able to move and rental assistance for moving. So is that just... as a catch-all because it's required by code. Can you just elaborate on why that's there since we have that mechanism in place?

That's a great comment. It does seem a bit out of place in our code because it would not apply to our current provisions. It does align with the statute language. So to offer the extension, we do need to have that code in there. And then it also future proofs if at some point we choose to change.

Council Member Kritzer?

I had the same question.

Okay. Wonderful. Uh, council vice president, anything you'd like to weigh in on just making sure before we go back.

Thank you. I appreciate that. The questions that I have have already been asked.

Awesome. That's great. Uh, council member Parsi.

I had one more question about occupancy validation. So if I understand correctly, right now there is no requirement from us to make sure that the units that are provided at this cost to the community are actually filled or actually filled as even in a percentage of the time that the unit is available on the market. So I'm curious if it would make sense for us to consider adding an occupancy requirement into the program or not. And if we have already evaluated it, what did we consider? And there could be administrative costs or other barriers for getting the occupancy And I would really love to know from the program that we've offered so far, how we've evaluated occupancy, how we've seen it, and how did we decide to go without an occupancy validation?

I'm sure Ian will have more to say about this, but ARCH units are generally oversubscribed. So it's not a matter of ensuring occupancy, it's a matter of building more units to serve the population that needs those units. With respect to ensuring that the people that are living in those units are actually qualified, those are very rigorous standards administered both through the MFTE process and through our covenants that are attached to any affordable housing unit. And ARCH actually is responsible for monitoring that on our behalf.

Thank you. I'll go ahead and just weigh in with a comment of my own, which is I really appreciate the time to bring this back and for the additional context on MFT as a tool that was provided in the packet and the additional matrix. I think that was really helpful for the council I also had the pleasure of joining council member Soni at the arch council of elected officials last week where they were studying tools just like this one and inclusionary zoning. And Redmond was once again held up as a regional example for producing an outsized amount of affordable housing and housing in general and across our region. But also the importance that I think is a little bit reflected in some of the feedback we did receive as a council from the development community you know, hopes that this one more tool could be tweaked in this way, this way or this way. The goal tonight is not to adopt a tool that will solve everything and especially be able to address the macroeconomic conditions that we're experiencing at the moment, but also to be able to add to the tools that are available so that when the conditions are right, we can continue to see more housing and development. We do have 6,000 units either in the pipeline or with cranes in the air at the moment here in Redmond. And the council will also be having a staff report in the fall related to the production of middle housing that is happening all around the city. So I'm happy to support this tonight and I'll see if there's any more questions before we do that. Council member Prakriti.

Thank you, and I'm looking at section three items B and C right now. The affordability, sorry, the relocation assistance items. Particularly C, I was just wondering if I could get more clarification on when the affordability requirements would remain in place and when they wouldn't remain in place after the expiration of the exemption.

So the short answer there is all of the affordable housing units created through the MIZ or MFTE are bound through a legal covenant and as such will remain for the life of the project, period.

And that's not through the life of the MFTE program. It's for as long as the project is in existence.

And so that specific component of that code language is again just the statute that was in the RCW that is required as part of any 12-year extension. So theoretically, there are situations where when the exemption ends, the affordability ends, but that is not the case in Redmond currently.

Okay, that's what I thought. I just saw that language and I was a little bit confused. Thank you.

Thank you. Council Member Soni. I have a question for the 20-year transit-oriented development option. I know currently because we feel like we do not have enough information even from the state, but what would define a milestone where we can feel like this can be added back and do you think there will be more value in going for the 20-year TOD option?

down the line I'm just like you know not asking for immediate but down the line a 20-year program offers many more years of exemption than the 8 or the 12 year like it is a lot more and so it is very attractive to development especially because as written in the RCW the affordability requirement parameters are, for a Redmond perspective, pretty generous. It's not asking a lot to get that 20 years of exemption. And because the exemption scales so well with developments of every size, it would be very attractive to development to pursue. And so our hope is that through continued continued analysis, conversations with our development partners, and clarity from the legislature and commerce, we can continue our analysis and figure out the right size for Redmond.

Thank you. Council Member Kritzer?

I appreciated the information in the packet of some of the learnings from the pilot that we did on the 12-year MFTE. I was just curious if you could share in particular any ways that that informed the policy that's before us.

Absolutely. So as a little bit of a reminder, our pilot program was adopted in the summer of 2023, and it provided a 12-year program to all the RTAs, And notably 12 year programs require a 20% set aside of affordable housing units. And that was one of the big focus points we heard in our conversations through developers where in some contexts, increasing the set aside or the overall required amount of affordable units had a bigger impact than deepening the affordability in terms of their financial feasibility. What we learned from the pilot program, which existed for about a year and a half, we had two developments opt into it. We had two that did not. However, we do want to put an asterisk on our findings at that time because it was 2023 and 2024. So again, very volatile market conditions, but it did demonstrate that having the tool in the toolbox of some programs that did have a 20% set aside requirement could work and would be chosen by our development partners.

Thank you. Are there any other questions or comments for this item? Ian, would you remind us about next steps for this item?

Are we ready to go to a business meeting for consent? Terrific.

Did you have a specific date in mind? Or would Monday, August 3rd work just fine?

That works for me. I would have to look up specific dates.

All right. Well, we'll go ahead and just get thumbs up from the council. Thank you, Council Member Forsyth. I do see thumbs up around the table. No objections to this item going to consent. So coming to a consent agenda near you. Thank you so much, team. Really appreciate the extra time to bring this back and to have a thoughtful conversation on this tool. Appreciate it.

Thank you.

Thank you. The next item on our agenda tonight is multifaceted. We're gonna invite the finance team to join us. The title of the item is the Budget Process Update, Utility Rate Study, Long Range Financial Strategy and Fiscal Policies. In just a moment, I'll ask Director Cochran to kick us off. We are gonna do this item probably in at least two general pieces. So we will first complete our discussion of the rates, if that's okay with the team. before we move on to the fiscal policies and the long-range financial strategies, which are a couple of policy items the council's hoping to be wrapping up before the recess. So, Director Cochran and team, Deputy Director Nara. Thank you so much.

Good evening, council and the community. Thank you for having us tonight. While Haritha is getting us ready to show our slides, just wanted to take a couple of minutes to give you some additional I wanted to let the community know that there are updated slides available attached to this meeting agenda. Finance Department is feverishly working through new forecast numbers. So as June closed, we took a little bit more time with this agenda item so that we could bring you some of our preliminary forecast numbers for the utilities. So thank you for your patience with that. I also wanted to say thank you to all of the community members and staff that participated in the events at the budget booth during Derby Days. It was a real pleasure to hear from so many folks and engage that way. So thank you to everyone that stopped by. We were quite popular with bubbles and candy. We are here tonight, as Council President Stewart shared, to cover two items. One is a preliminary look at our city's utilities. I have with us tonight Chris Stenger, who is our Interim Public Works Director, as well as Amanda Balzer, who's been here forever. I don't know her position anymore, but she is a know-it-all when it comes to the city's utilities, and it's always a really great pleasure to partner with her on anything. We are here tonight to share with you an overview of the city's utilities, what's occurring locally, what's occurring regionally, and how our financials are responding to some of that pressure. We'll provide you with sort of what the next steps are, what you can expect may or may not occur to the numbers that we're sharing with you before we deliver the final forecast at the end of September. And then we'll walk through some policy issues related to the budget documents we've been updating, working really to get a roadmap on how we work through some of those further updates in the non-budget year. So I am going to hand it over to Amanda, or Chris actually, to Chris Stanger to get us started on the utility overview.

Good evening, Council. As introduced, Chris Stanger. So first slide, we're going to go over core utilities delivering critical services. So this slide provides an overview of three core utility systems that provide essential services to the community every day. Water, wastewater, and stormwater. We'll start with water. We provide safe, reliable drinking water service to more than 20,000 homes and businesses throughout Redmond. Our system distributes regional cascade water while also maintaining an independent water supply through five city-owned municipal wells. Having both regional and local water sources strengthens the reliability and resilience of the system. We also maintain approximately 360 miles of water main, ensure compliance with stringent state and federal drinking water regulations, and provide fire flows that support emergency response across the city. So now going on to our wastewater system, it works around the clock to safely collect and convey wastewater from homes and businesses to the regional treatment facility like Brightwater up the road. While it's largely out of sight, it's one of our most critical public health services, protecting both our community and the environment through reliable collection and transport. And finally, our stormwater system which manages approximately 11 billion gallons of rainfall each year through roughly 200 miles of stormwater pipe. This infrastructure reduces flooding, protects homes, businesses and public infrastructure, responds to spills to help prevent pollution and protects approximately 50 miles of fish bearing streams. These investments improve water quality and help preserve the natural resources that are important to Redmond's character. So together, these three utility systems represent billions of dollars in public infrastructure that residents rely on every day. Our estimates right now is about 3.5 billion for the utilities alone. So maintaining and replacing these assets is essential to continue to provide safe, reliable service today while preparing for the future. Next slide, please. All right, on to the risks. So this slide highlights some key challenges facing the utilities today. These are not just unique to Redmond, they're unique to the region and the country. The challenges across the utilities in Washington and the Puget Sound are working through at this moment. So first is aging infrastructure. Many utility assets such as pipes, pump stations, and other facilities have long service lives. As they age, they require more maintenance and eventually rehabilitation or replacement to continue providing reliable service. Utilities are also adopting to evolving state and federal regulations. Drinking water, wastewater, and stormwater systems are all subject to regulatory requirements that help protect public health and the environment. As those requirements change over time, utilities must continue investing in their systems to remain compliant. Another challenge is increasing the cost of delivering utility services. Like many public agencies, we're seeing higher costs for constructions, materials, equipment, and specialized labor. Those cost pressures are being experienced throughout the region. Our regional partners are planning for many of these same challenges. For example, King County continues to invest in regional wastewater system to address aging infrastructure, accommodate future growth, and meeting environmental requirements, like as the Lake Hills Trunk Line project. Redmond's focus is similar at the local level, using long-range planning and asset management to make strategic investments that maintain reliable service for our community. Next slide, please. So regional and local investments. So this slide illustrates how the average single family utility bill is divided between regional services and Redmond's local utility systems. Although customers are billed every two months, these amounts are shown as average monthly charges for easier comparison. Starting with water, approximately 38% of the monthly water charge supports our regional water supply. The remaining portion of City's funds protect the local water system, including the infrastructure, operations, maintenance, and improvements needed to deliver safe, reliable drinking water to our customers. For wastewater, about 79% of the monthly charge supports regional wastewater treatment. Redmond owns and maintains the local collection system, while King County, as I stated before, provides the regional treatment before the water is safely returned to the environment. Finally, stormwater is different because there is no regional service provider. 100% of our stormwater revenue remains in Redmond and supports local programs and infrastructure, including drainage systems, maintenance, flood prevention, water quality improvements, and protecting our local streams. So the purpose of this slide is to show you that utility bills support both the city's local utility systems and the regional partnerships that are essential to providing these services. Together, these investments help ensure reliable service, protect public health, and support the long-term sustainability of our utility infrastructure.

All right, i'm going to jump in and talk about the system challenges amanda balser i've been here for 18 years my current title is policy and strategy manager with utilities. So the first thing I want to point out is this map shows the median water pipe installation dates. across the neighborhoods in Redmond. Generally, life expectancy for these pipes is 50 to 75 years. This is highly dependent on the type of material, the environment, preventative maintenance practices. You could have a pipe break at 30 years.

You could have pipes last over 100 years.

Thank you. You can see on this map, we have a few neighborhoods, Mammich Valley and Idlewood, that are hitting that 50-year mark of life expectancy for the median install year. I also want to point out that although this map just shows a water infrastructure, that wastewater and storm are of similar vintage.

I'm going to continue on to the next slide.

This slide just shows another way to look at our aging infrastructure. It shows the cumulative miles of pipe installed by year for each utility. So the blue area is the water pipe installed, the red is storm, and the green is wastewater. The yellow hashed area is the pipe that is at or near life expectancy. This illustrates how Redmond has developed over time. We have large amounts of pipe that were added, for example, in the 1960s when Evergreen Bridge was built, and then we had access across across the lake, now we know it's 520. And in the 80s and 90s, we had tech industries like Nintendo and Microsoft that came to Redmond, and then also the Growth Management Act that started directing density into these urban neighborhoods. So you can see that you have significant amounts of pipe that are aging kind of at the same time due to this kind of development pattern. So for the utilities to continue to provide a reliable service at a good value, we need to be strategic about our investments. All right, so what's working now? You know, we are keeping pace with growth right now. I really want to stress on here that we have professional, skilled, efficient, fantastic maintenance crews. When there are leaks or issues out there, they take care of them really effectively and fast and get everyone back online. We have a robust monitoring program, water monitoring program, and we're coordinating with Department of Health regularly to ensure that we have safe water that we're delivering and keeping track of that changing regulatory landscape. Some of the other items we're working on is we're in the process of developing a comprehensive stormwater and surface water system plan. And we anticipate adopting that next year. And you'll hear more about that either later this year or early in 2027. One of the areas for capital investments that I think we've really done a great job is with our lift station rehabilitation. we're nearing the end of like a 10 year cycle of rehabilitating rehabilitating those systems. So we want to continue that as we kind of build out our pipe renewal needs. And we're identifying some early wins now. So we're identifying those multi benefit projects, so that we're combining utility replacements with pavement projects. And examples of that are the Northeast 20 24th Street and viewpoint projects. We are in the process of PFAS treatment and feasibility. I work with a consultant right now, but I want to point out, yeah, next steps is great. No, you're good. That is one of our risk areas for water utility is that we know that we will need to install treatment at supply wells one and two, but we're in the process of working out that feasibility and design. So it's not fully scoped. Once it is fully scoped, we will need to work that into our CIP process. to move that project forward. And we anticipate that feasibility work being done in early 2007, or 2027, sorry. And some of the areas that we've focused our enhancements for this budget cycle are developing preventative maintenance programs in our water utility as a bridge to extend life of our assets. Also developing pipe replacement strategy to target so we can build out that for each utility and then target those multi-benefit projects and really get the biggest bang for our buck. And then another area where we focused is completing studies and assessments to inform those investment decisions. And that goes beyond even pipe replacement. And so we can target right place at right time. Overall, the utilities are moving in a direction to increase pace of utility renewal so we can keep pace with our aging infrastructure. That kind of overview of the utilities, I'll hand it over to finance.

Thank you, Amanda. So when we look at the utilities financials, they are run like a business. So utilities utilize either what we call proprietary funds, or you may have heard of them called enterprise funds before. which really means that they need to be self-sustaining. So the rates and the fees that we set need to cover all of the operations of the utility. And that is what governs how we set our rates. Go ahead to the next slide. I wanted to orient you to where we currently are in comparison to our neighbors. In addition to having the three different types of service, we also have two different water wastewater service areas. We provide service to residents, our community members here with inside of city boundaries, we also provide water to an urban plan development in King County referred to as Redmond Ridge or we refer to it as Novelty Hill. When speaking with Cascade the other night, you heard about some larger than normal rate increases coming from them and how it is that the city can manage those types of increases. And each one of these utilities is impacted and responds a little bit differently. And so I wanted to walk you through not only where we sit in comparison to other jurisdictions, but what is kind of driving where we are. So Novelty Hill is, go back for me, it's okay. Well, I guess we can keep going. So let me first touch on the assumptions that we are working with. So the two biggest impacts that we have are coming from King County for wastewater treatment and an increase coming from Water Alliance to help us with our longer-term water plan. And we have outlined sort of all of the other assumptions that we're making. The utilities really are in great shape when it comes to the reserves that we have for revenue collection, for adequate We also have a funding mechanism that many other utilities do not have. So we fully fund depreciation, which means that there is a constant flow of funding going into our capital fund to help offset some of the replacement or major maintenance costs of assets that we are trying to maintain. So when we look at applying all of those assumptions to the city, there's a couple of things happening in the city. So although we see pressure on the expenditure side, we have growth occurring. Prior to 2018-19, we would consider a growth rate of about 1.25% in our customer base normal. And since 2019-2020 timeframe, we've been above the 4% and 5%, largely driven by mixed-use development or multifamily development. So you're seeing our growth in our customer base is allowing for us to absorb some of those expenditure increases that we get hit with, whether it's salary and benefits or whether it's costs from King County or Cascade Water Alliance. In the city we have a growing customer base and our customers are also using more water. So there is a kind of a lag in the time, let's say a big multi-family building comes online for it to get occupied and for us to start generating any kind of trends. And we're seeing both happen now. So that is one of the things that is allowing us to minimize what could be much larger rate increases to the community. When looking at Novelty Hill, they do not have that benefit. So since about 2022, we have been built out, flat lined. Really the only kind of excitement that I get up there is when management changes on the next slide. at the golf course, and you can see sometimes that causes a little squiggle in irrigation. But we really don't have much growth up there to help offset some of those expenditures. So it's a small customer base, it's only 26 years old, so infrastructure is new, depreciation costs are high, and it's spread among a pretty small customer base. So that is what drives the higher rate increases in the Novelty Hill area. In the city service area, we're growing, our base is growing, our demand for water is growing, and we already have built into our funding structure a mechanism to offset some of our capital costs, unlike some of our neighbors who have had to build those in later to help generate some support for the capital programs. So that's what lets us remain competitive when it comes to the city rates. We also produce through our five wells about 40% of our water, which does help us quite a bit when it comes to offsetting some of our reliance on Cascade Water Alliance. So these are our preliminary rate expectations. We will have final numbers for you at the end of September. I, there's a few things that need to occur for us to finalize where we are. There are still some really important months of not only demand but revenue to understand when it comes to the city's utilities. The summer is when it all happens. And what we earn in the summer helps us alleviate some of the rate pressure in the next year. So there may be some solutions for us there to help smooth out some of the rate impacts that we're even queuing up now. We also are in the middle of budget balancing so it is there's potential that if we add a need that is a citywide need that there may be a cost increase to to the utilities. I've also Left some flexibility to address any changes in Cascades assumptions or King County's assumptions. I expect less from King County and really am hopeful we receive none from Cascade. But we have been on the receiving end of some corrections in the past that come in sort of late in September and I just want you to be aware that that's possible. Typically it happens when there's been a calculation error on another member and then they need to kind of reallocate everything correctly. They're great folks. They know what they're doing. Stuff just happens and I want to make sure that we are sort of in our financial plan but then our next steps is we will finalize our revenue forecast gives me some more opportunities to look at some strategies to smooth rates and to come along with Public Works as they are developing their longer-term plan just like we did with the capital investment program we will come back to you when Public Works has the information that they need to feel satisfied that the longer term plan that they are putting in front of council is data informed and can be delivered. And so we're partnering with them and we'll come forward with them with a longer term plan when they know. But we are finishing our forecasting, smoothing what we can for now, finishing budget balancing across the city where there may be some trickling effects. waiting for final numbers from Cascade. And we're also working through a couple of elements of a typical rate study. So we're making sure that each one of our customer classes is paying for their fair share of the system. So we have residential customers, multifamily, commercial, irrigation, and we look at the cost burden of each and make sure that their rates collect what they should in order to cover their piece of the pie. And we're also looking at rate design. How do we put rates in place that are simpler for customers, that encourage the type of behaviors that we look for in our customers when it comes to conservation and still generate the revenue that is needed from the city. So we're working with Public Works on some of the ideas that they have to put together a new rate structure. And so we'll bring that forward in the September timeframe when we are a little bit more secure. I feel very happy to not be seeing some of the increases that I was a little worried we would be when hearing all of the pressure. So although not yet satisfied that we are putting through the lowest that we can for our community, I know that we have opportunity within the next couple months to bring something back to council. Any questions on the utilities, where we're headed, anything you'd like to know when we come back in September?

Thank you, Director Cochran and Amanda and Chris, the whole team. Really appreciate that. Kicking us off, Council Vice President.

Thank you, Council President. Thank you for the presentation and all the work that went into it. For the listening public, pardon me, for the listening public that may have not been familiar with a term that we've been using regularly, but I'm not sure how often we define it, could you at a high level just break down rate smoothing? Oh, sure.

Thank you. So rate smoothing. So we have three financial tests that we utilize when ensuring that the utility rates are sufficient. We look at an operating test. Is there enough operating income to cover the operating expenses? We look at a cash test. Is there enough cash to pay the cash? And we make sure on our third test that we have debt coverage. And we look to make sure that we ideally pass those tests each year. But there are times where it's appropriate to make sure that we pass for the biennium and utilize some reserves to help smooth those rates for our customers. There are also times that we can work with our departments in public works or in finance or planning, whoever is contributing to the expenditure side, and work to smooth out the expenditures. So we may work to postpone an activity till the next biennium, if it's appropriate, or to smooth out the expenditures so they're not peaking and valuing and causing disruptions to the rates. So it's really us utilizing the resources we have to minimize the impact but still pass our tests. Thank you. You're welcome.

Council Member Kritzer.

Thank you. I guess more comment than a question is just to your previous point. I think just seeing the trends in terms of the rates and the compounding amounts of rates in addition, not only from our city but also the regional utility rates, Um, I think as much as we can aim to smooth, uh, both on the expenses as well as, um, where we, where we end up, um, you know, doing rate increases. And I'm curious to hear more about any other kinds of things that you expect out of the affordability analysis. Um, but I, I think it, especially for the upcoming years, um, as we can be really strategic in doing that planning. Our residents will thank us for that because we're hearing a big pinch from them. Yes, agreed.

And when we come back to you in September, we will bring with us bring with us a comparison. So you'll be able to see what the impacts may be. And if we have some options, we'll bring you a couple of options to choose from if we've got

Yeah, I'd definitely be interested to see options.

Thank you. Council Member Forsyth. Thank you. Thank you for the work here. This actually dovetails nicely with earlier today. I was asking for an update on the water policy that was put forward a while back. And so part of that conversation is about what the commercial rate payers pay versus the residential. So I'm Very interested in seeing kind of where that breakdown what that breakdown looks like if you can send that before September i'd love to see it. Or we can just loop that into the September conversation, but I think that would dovetail nicely with what that water policy was that we were just chatting about. To see if we're kind of on track if we need to do more work there or if we've got it covered within this structure so appreciate that thanks can do.

councilmember Sony. So with the increase that's happening from the wastewater from our cascade water lines, will there be any utility assistance programs for the communities that may not be able to keep up the pace with this increased or the spikes that's going to come?

There are two ways that the utility funds contribute to affordability. There is a lot of restriction around the use of the funds, and we have to be very careful to not provide a gift of public funds, but we have two programs that are heavily relied upon. We have a low income discount for seniors and disables, which gives 50% reduction on the total utility bill. We also work with Hope Link to help provide assistance through their organization for rate payers that are struggling.

I'll go ahead and chime in with a couple of thoughts and thank you so much to the team for bringing this forward. As has been mentioned by my colleagues, we're hearing a lot about affordability right now and even in our last study session. affordability was the top concern of Redmond residents at the moment. We have a few rates in front of us. We know what's happened with solid waste and we also know what's happened with electricity. King County has also recently just passed a new sales tax on and on and on. So as we're trying to track that, that is absolutely top of mind for, for many of us. I am serving on the regional water quality committee and have updated the council along the way on the, proposed rates, these 12.75% for each of the next six years. So not just this year, but in the future. And on balance, part of the reason why we are stuck with this high rate and need to catch up is because we didn't do the preventative maintenance or King County and the regional system didn't get the preventative maintenance. There are other reasons and answers that are far less clear than they are at Cascade Water Alliance. And we can have that conversation another day. But I do want to say when we're looking at options in September, I would like the council to have a chance. I think this council has in recent years also cared a lot about making sure that we're maintaining the assets that we have and having a chance to weigh in on what kinds of investments are needed today so that the next generation of this council is set up for success. in the future. Thank you. Any other council member Kretzer?

Yes, one question that I'm curious about, if we do did want to both make some of those preventative investments more proactively, but not necessarily have that correspond with with an even greater increase in rates would be whether we have any options to ever supplement with other types of general fund capital dollars on these types of projects.

It is allowable, and we have utilized general fund when there's been a utility shortage in the past. It is not something that we have looked at this time because we've got such a robust need on the general fund side as well when it comes to our capital program and some of our one-time things. But that doesn't mean that once we get all settled that there won't be an opportunity. So I certainly can kind of wait until everything gets figured out and see if there is either an opportunity now or if we can queue up an opportunity in the next biennium. Thanks.

Council Member Parsi.

For the last three items on this slide, would you be able to share a rough timeline

Definitely. So we are, for the cost of service analysis, we have met with the consultant and they are just working through some minor edits for us. So they provided us with some options. We asked for some changes as well as some minor corrections. So that should be finishing up very soon. The rate design has kicked off and we have asked for that to be completed and ready to share in the September timeframe. The rate affordability analysis we will be doing in-house, and we will bring that information in September as part of the rate forecast. We have been using a test by APWA, but we'll also bring you a more extensive look at, as Council President Stewart pointed out, all of the impacts that we're seeing hitting the community, even outside of our utility, will hit some of the private as well.

Other comments or questions or requests for information ahead of our next conversation in September regarding the rates? Council Member Pacquia.

Just looking at the slide on the utility rate revenue adjustments and also the fact that stormwater is the only one of these utilities that is completely in-house and it has the lowest increase of these rates is what it seems like. I mean, what are the alternatives to on the public work side for bringing, I guess, more of these other services potentially in-house? Because it feels like that there is a correlation between these services being in-house and lower utility rates, increases in utility rates.

So on the majority of a council member, one is the regional partnership with King County wastewater district that we're locked into. The other one would be cascade water, water district where 60% of that we have a share in that agreement with them. So 40%, you know, we have the well network that we can, we can do in-house there. Stormwater is, you know, like they said, it's not a regionally managed there. So we have a little bit more to play with there, but you know, Long story short, it's both of those partnership and agreements that we have that prohibit us from getting more involved at the moment.

Do you know the timelines on both of those agreements? When they expire, how long we're currently locked into them for? We can get that to you.

I'll also hop in to offer on balance for my colleague that regionalism is often a preferred solution. In the case of like wastewater, we are cleaning the water before it ends up in Puget Sound and we're not on the border. You know, we don't touch the sound. So the wastewater that travels from Redmond down through Renton gets cleaned and then eventually makes its way to the sound. We literally are not, on the banks of the Sound in order to clean the water before it gets there. So if we think the MOC is a big project, building a wastewater facility to clean water before it gets to Puget Sound would be a hearty investment. So by banding together, you know, we've talked about all of our regional partnerships today, our utilities, in addition to ARCH, all of that, sometimes regional solutions are the preferred benefit because we get so much more by working together. Yeah.

Yeah.

Mayor Burney. I will add in around Cascade Water Alliance. As Interim Director Stenger mentioned, Cascade Water Alliance provides 60% of our water. We do not have the capability of providing the rest of our water. What we do use with Cascade is an agreement with Cascade and the other jurisdictions to get water from other entities. And by working together, which is why Cascade was set up to begin with, we actually get a much better rate for water for our customers. So in the long run, that regionalism, that working together actually gives us buying power in order to reduce the rates of our community that are coming through Cascade. And as many of you remember that we just last year signed an agreement with Tacoma Water. So we not only ensure that we get lower rates over time by having those agreements, but we also ensure that people, we have water over a long period of time, which is something that the city of Redmond, we cannot, the amount of water we produce on our own is not enough for our entire community. So those are the reasons that those two systems, as Council President very eloquently shared about wastewater, it's really important for us to be regional in those ways. These are things that we just cannot do on our own and provide the service that our community needs.

Appreciate the conversation. Yeah, Council Member Forsyth. I just want to also shed a little light on the, and please correct me if I'm wrong, the reason we're seeing zeros on a lot of these years was because of pandemic rate freezes to make sure that people were able to, you know, stay in their homes and all of that. So the reason we're seeing a bigger jump now is because we didn't do some of those actions back in 2020, 21, and 22. Thanks for that. Appreciate it.

Well, I'm hearing a lot of enthusiasm for us to come back to this conversation in September. I'll guess I'll say if anyone has anything else that comes to mind about the rates and the questions that we'll ask in September, feel free to be in touch with the staff. But for now, we'll move on to the second half of the agenda.

Thank you. All right, so the remaining part of the discussion tonight is really queuing up some policy questions or issues for Council to wrestle with when it comes to further development of either our fiscal policies or our long-range financial strategy. When looking through a lot of the comments, it was pretty easy to put things or categorize things into a few different buckets. So I will be walking you through a couple of recommendations to add some new strategies to help capture quite a bit of interest that was there in terms of planning for emergencies with our budget as well as ensuring that we are taking care of our assets as we expect. We also want to talk about community engagement, some of the opportunities or parts of the process that we have in place and where do we want to point those towards in the next biennium or in preparation for the next biennium. And we'll also be talking about the community investment rate. Smushed in there, but for some reason I forgot to put some policy questions, but there is a couple of questions. related to our investment policy as well as our reserve amount. So we'll hit that as well. So I'm going to cover the first four items and then Haritha will walk us through our community investment rate, some history, some of the tools or options that council has to turn that dial that we can prepare for you for a discussion next year. So the first item that I want to recommend is the addition of an asset management strategy as a strategy in the long-range financial strategy. So we will be really strategic by the time we are done. In the past, we have spoken to asset management and our priority of maintaining what we have before we build new, but we do have a number of departments that are actively working to implement asset management strategies. Our Public Works Department is working on developing a citywide plan and departments are working to start identifying their assets and as you just heard from the utility folks, working on putting financial strategies around the future replacement of them. So what I would propose doing now is I can certainly write up an overview of what asset management is for us, what our goals will be and that we're working to develop that strategy within the next biennium. give us an opportunity to ensure that we have captured the correct principles or outcomes that council is looking for, and we can update that section of the document more thoroughly with your input in the next biennium. Any questions or thoughts on that?

Sorry, I'm raising my own hand while I'm chairing the meeting. I'm gonna ask a logistics question and I'm gonna ask it here at the top because it could come up a few times. So the proposal is to create this strategy which, so tonight was intended to be our last study session on these two policies so that we can move forward in September with the budgeting process. And so you're proposing to, create this policy that when would the council see it again if it was created?

I have drafts actually already done. I just didn't want to put them out there before I knew you guys were okay with the idea. So it really is just sort of introducing what council will be working to develop. So we want to put together an asset management strategy. We want it to, you know, in

enhance us you know in this way and you know we'll be working to develop in the next biennium so pretty vague but just the intention to develop a strategy to inform decisions in the future um so the timing i'm getting a little bit more granular would it be a policy that we would consider in this biennium um or would we not be considering the exact language until next biennium

If you're interested and don't wanna talk about it or do anything until the next biennium, that's absolutely fine. We can bring it back and add them and work through them. Or if you wish, I can add to the document that we'll be working to develop those strategies and leave the language just very vague just to discuss our intention.

Okay, I'm just going to clarify for myself then that it was our hope to have these policies updated, you know, ahead of the budget. I would be willing to work to make the time to make sure that council has a chance to get this, to make the decisions that we have direction on as a group in this biennium. And so we should, from my position, that is work we should continue on. This was work that we had slated for 2025. With that, that's my clarification on the logistics of it all to the extent that I've made it now very muddy. But Council Member Parsi, I believe you have the next question.

I'm also supportive of having this earlier rather than later to make sure that we're aligned on the goals that we're driving. And I also had a clarification question. When we say long-term here, can we specify exactly kind of what long-range means? And are we kind of looking at critical assets only or assets in general?

And Council Member Kritzer?

Yeah, I would just want to say that I am supportive of adding a specific strategy on this. I think we have heard over the past many years from our community about the interest in knowing that we are being proactive in maximizing value and minimizing risk and being really thinking through how we care for the things that we have so that way we don't end up especially with failure of infrastructure. And so I think having having that extra emphasis of including it as a strategy in here makes a lot of sense.

Council Vice President, thank you i'm just to round us out to give you an idea where where the Council is on it i'm also in. support of adding this to there, being proactive. Council Member Kritzer said it very well in how are we adding value and being good fiduciaries. Council Member Prakrit?

Thank you. I would just like to get some clarification on what is actually going to be in this particular strategy, the asset management strategy. To me, it seems almost circular where my understanding was that we currently do not have the capability to manage many of our assets around the city. And this would require a budget ask. But then the information we get from the asset management of our assets would also inform our budget. So it's almost a circular thing as compared to the other budget contingency strategy, which is just more of a, of a financial item. Is the asset management strategy that's listed here just what we will categorize with our current technology that we have in the city as far as our assets go? What is exactly in this?

So in my opinion, this strategy should be forward thinking. It should outline where you want the city to be and get to, and then our job is to get there. So it should be sort of future-proofing the city, putting a policy in place that informs how decisions around asset management are made. And so I am, you know, there are experts in asset management within the department that are within the city that would be responsible for helping to write this and putting together the right elements of an asset management plan, which then would be reflected in your strategy. So it would outline what kind of assets we're talking about, what the different principles are that govern it. So it would be essentially inserting an asset management plan for the city or an overview of an asset management plan for the city as a strategy in the long-range financial strategy.

I'll chime in to say something I meant to ask or call to attention at the top here, but the slides and topics that are before us tonight are the culmination of the items from the matrix that was emailed out ahead of the last study session, I believe it was. So I do believe that this item particularly responds to some of the questions and concerns raised by Council Members Soni and Parsi and interested in making sure that this prioritization does exist. So would love to hear from either of you if this is headed in the direction that you were hoping for. I'm already seeing a nod from Council Member Parsi, so that's wonderful. Council Member Soni.

So I am totally in favor of doing this together. It has to go hands-on because basically what we are putting it up in the budget is what, but this will also help us to explain how we are going to make sure like, you know, putting some of these policies together to ensure like, you know, how this has to be done and will help us. Otherwise, it will be like, you know, I just have a fear like, you know, otherwise the budgeting will be done in pretty silos. So that was one of the reasons. It's like, you know, looking into some of these things holistically will help us. We may not be able to complete all the policies, but doing an early start while we are working for the budget will be very helpful. That was my thought process.

Okay. Council Member Parsi?

And I just wanted to make sure that I add that what I'm most interested in critical assets that are the largest, most valuable, and can present the biggest risk to the community.

Thank you. So I just, again, want to make it clear that I'll be queuing up, that we're going to develop the strategy together in the next year, and it's going to be important because of this. And then we will work together to develop the strategy in the next year. Does that make sense? Council Member Kritzer?

Sorry, just a clarifying question. So you'll develop the strategy over the next year, but for now, with what we're going to pass, we would add a line essentially saying one of our strategies is this. And then we'll come back and we'll add more detail.

And it does look like the staff have passed around a copy of the latest edition of the documents that have changed a few times is that correct, so the fiscal policies and the long range financial policies, the red line version so Council can. better track these. They were intended to be in your packets for tonight. So this could become a homework item over the recess for folks too. Okay, so we will have a nod to this in the next draft and then prioritize the creation of the strategy over the next year. Okay, let's move on to the next one.

So the next one is a budget contingency plan or a what if the worst thing happens plan. And we have already started working on this for council members that were with us at the very exciting beginning of 2025 know that we sort of immediately looked at what would happen if a typical recession were to hit us now and how would we respond? And we know that we can respond by quickly eliminating some of our non-essential spending. But it's not the most informed response to an economic downturn that we would want to have. And so what I propose that we do in here again is just to acknowledge that we would like to develop a budget contingency plan that it should have certain elements to it. And we can work together over the next biennium to ensure that it speaks to the policies and principles that council wants to make sure are in place. We've started some phases of the financial analysis and we can start working with council and documenting what those choices look like, what those decisions may be. So we've got a budget contingency plan think available to for the community I would assume early early next year so again queuing up a new strategy outlining that we're gonna work on it together put it on the roadmap and bring it back to council in 27 councilmember Kritzer

Thank you so much for this. I think this is really smart. Having been here during the pandemic, I feel like one of the conversations that we had was When do we decide if it's the rainy day when you need the rainy day fund, right? And then how rainy does it need to be, essentially? Because once you use it, then you don't have the next set of reserves, especially when there's a large amount of uncertainty of how long something will last. So I do think having a little more detail in our strategies to help us to assess that and to decide when do we actually use more of our reserves and when do we say, even though This is a more extreme moment. We may decide to make different decisions to keep that reserve because we might need it even further out.

Council Vice President. Thank you. Director Cochran, can you remind me? You had mentioned and I was getting a thought together on the timeline of this. And the reason why I'm asking is because we're already starting to see and hear rumbles about volatility in the next few years. depending on midterms and how that goes. We're looking at conversations around market manipulation, not only how hard is it going to hit when it does hit, but then how long is it going to take for us to recover? We've seen examples, and by no means am I saying this as a way to incite any type of fear, but when we've seen something similar happen in Japan, it took eight years to recover from that. And not that I'm wishing that at all on us, but looking at the contingency so that when life happens, that we've got the space to be able to pivot. So I'm very much in favor of building out a contingency plan. But my question is about the timeline of when we would have something in place and with the definitions or prescriptions of the limit tolerances that Council Member Kritzer was talking about.

My goal would be to have it finished by second quarter, end of second quarter next year.

Thank you.

Council Member Forsyth. Thank you. And love where this is headed and developing. I was just sitting here reflecting on from the last conversation around rate freezes due to pandemic and then reflecting on the Spanish flu and impacts from that pandemic to flash forward 100 years. And I just was sitting here and just kind of wanted to collect my thoughts around that and realizing that a lot of the other impacts that came out of that Spanish flu, Great Depression era was a lot of mistrust in government, which we are clearly seeing today. So part of that plan, I'm hoping that we can include a communication strategy for connecting with community and saying, we have this plan, we're planning for these things. And then once it does happen, what that communication plan is so that we're maintaining and building that trust that is so delicate and fragile right now and results in all of these larger economic instabilities that we are actually proactively going out and doing that work.

Thank you. I agree. And I also think that this is an excellent opportunity or place to include the community to understand what it is that's really critical to them that we maintain during those types of downturns. That was one of the things that we really relied on the community for during the pandemic and I think would be very insightful.

Council Member Kritzer.

Sorry, one other thought on this. One thing that I think would be interesting as you go into this work to revisit is a conversation we've had in the past about what our general strategy is when we have what seems like a potentially temporary downturn or extreme circumstances on either a furlough policy versus staffing reductions and then later rehiring I'm not sure if our policies are super clear on that. And I think we are remember having some discussions as well. So it might be good to be forward looking on and have that policy discussion in a non emergency time about what optimally we would want to do. Great.

Other comments on this item? I will say that there are several comments in the matrices that also are supportive of this item. So I guess we'll practice our budget norms here tonight in making a list of policies for us to mostly work on next year. But is there support for continuing to work on this item? Lots of head nods all around. Thank you.

All right, so the next one, we have two different components of the budget that rely heavily on community engagement and was asked to bring both of them here tonight so we could talk about either what we wanna do in the coming biennium or in the coming year to prepare for the next budget cycle. or what we want to do in general with these opportunities we've built into the process. So the community strategic plan was implemented in order to provide a work plan that directed us towards achieving the vision in the comp plan. Sort of the comp plan is this long term, you know, 20 year plan, community strategic plan, shorter term. And the intention was the activities outlined in it sort of flowed then into the budget. It was a supporting piece um for the budget it's been a bit since we've updated it um need to sort of know if council's still interested in this document if it's relevant or if this is just a conversation that we want to kind of queue up early next year and discuss um the path forward

Council Member Forsyth? Well, being as someone who worked to update this plan with Council Member Kritzer as council leadership, I've found it to be very helpful and very guiding and setting those long-term visions. I know we haven't done a revamp of it in a while, so I think i think it is a logical document for us to have but i know we also have a lot of strategic plans now um so i think maybe taking a big swing next year at how does this now fit in with all the other strategic plans but i still do find as a community resource i find it very valuable

Seeing no other hands, I'll go ahead and hop in, because this is something that I had added to the matrix. Because when I read the draft of the policies, the policies at the moment specifically call for us to implement this plan. So at the moment, we're probably out of alignment with that. For my part, having been here for the latter half of Redmond 2050, I think that the executive summary of Redmond 2050 is our guiding North Star, if you will, right now. And rather than every year re re upping a community strategic plan, as the as my colleague said, we do have a lot of strategic plans right now. But the one we've invested in the most and the one that had the most diversity in terms of engagement and the broadest sector of our community participating in and helping us build I think for a few years at least. For me, the executive summary of Redmond 2050 fills this need and I would be open to simply swapping the community strategic plan reference in this policy to Redmond 2050. Council Member Kritzer.

I think that's an interesting idea. I mean, I would probably say comprehensive plan, so that way it lives even longer since we may rename it at some point. But I guess the one thing that I could see, which, yeah, I'm not sure where I would land on this. I think where I would land of whether we would actually continue to reference and use the community strategic plan is if we actually added some more structure around the community strategic plan and defined its unique value for us Um, cause I, I, I think it came out of a council retreat, uh, before any of us were on the council, uh, just before, um, I think it was like 2019 or something. Uh, and, um, and then we kind of updated it and used it to guide some, some budget pieces. But if we were to say, cause I do think we don't have any, and we've had this discussion at, um, several council retreats of, you know, what's our, our shorter term set of goals that we want to accomplish in the next several years. And that are kind of the the sub goals and really the focus of the Council that prioritizes also our work. And I think you could have that that could be part of what the Community strategic plan is or where we're going to how we focus even what our budget asks are really as as Council or where we where we focus some of our additional investments so. But I think you would need that bound to say, like you mentioned, maybe it's a five-year plan, but we didn't actually say that. I think we kind of said it, but we didn't set up a cadence for updating or all those pieces. So if we did that, I could see it being something that's useful to reference. At the moment, it's kind of a plan we did once and made some refreshes on and haven't codified. So I'd be curious to hear what other people's thoughts are on that.

Council Member Sonny. Based on the surveys, one of the result was that our communities are not able to see that their feedback has been incorporated. I personally feel this plan is a way for us to put it out, out to people in the community and our constituents that how we are doing it, when we are taking your feedback, how has this been implemented and how we are giving it back. So in my opinion, this plan is really important to address one of that feedback that we have received it in our community survey. Integrating it with other plans we can do, but as long as we are able to make sure that this is visible and not just getting lost in the big documents that is there. So that would be my points on that.

Council Member Parsi. I have a question about how we can integrate this and also stay with the big vision of Redmond 2050. Would it be possible to select highlight guiding points of this document and kind of integrate it with that executive summary of Redmond 2050 to have a few guiding community strategic pointers with that?

I'm sure that it could be workshopped. So I think, oh, sorry. Council Member Procrea.

I was just skimming through the latest, I think it's the 2023 version of the community strategic plan right now. And quite frankly, I don't know if there's anything in here that we don't have in our comprehensive plan because the way our comprehensive plan is largely structured is we lay out broad visions and then we have very specific number oriented goals for those visions. And I'm just looking through the community strategic plan and it seems like it's just the broad vision. So I don't personally see this document as very relevant. I think for instance, council members, Percy's suggestion might already be the case in our, in our blend, but I'm, I'm open to yeah, trying to integrate if there is, something that's in our community strategic plan right now into parts of our comprehensive plan. I just think it's already pretty much been done.

I think what I would like to recommend here is that we kind of put this at the top of our roadmap because it would involve the community. It would be great for us to kind of figure out what we're doing at the beginning of the year. And we could bring you some recommendations for you to respond to and kind of cater to.

I appreciate that, Director Cochrane. I don't necessarily think that, I think the reference in the fiscal policies is what highlighted this conversation, but it's not exactly, like as was said before, it was something built at a council retreat and it's, decision. I also am sensitive to not leaving tonight, only having put things on a to-do list for next year, because again, this is a body of work that we were hoping to wrap up tonight and was originally scheduled for last year. Let's go back to the conversation about is the reference to the community strategic plan okay for now, meaning we will invest the time next year to refresh that or is there interest in in Revising the language to reflect the comprehensive plan rather than Redmond 2050 But the comprehensive plan and then using that as a tool as was suggested I appreciated councilmember critters suggestion that the council could could use the values and principles of Redmond 2050 as the tool that she was referencing and Are there thoughts on that? New thoughts? Council Member Kritzer, it looked like you had a thought and you are the budget chair after all, so no apologies needed. Go ahead.

Well, I would just say I could see us like removing the reference for now to the community strategic plan in here and putting comprehensive plan. But as a council revisiting the community strategic plan as a tool for ourselves and thinking about how do we prioritize what are the things that we most want to work on in the nearer term and communicate that out. Because if you look at the current summary, it is a really great summary of, I think, a lot of the pillars that we really are working on. And it's easy for the public to understand without having to read our giant comprehensive plan or even the fairly meaty executive summary of the comprehensive plan. They can read in a two-pager what are the five things we care about and that we're working on. I know I had seen some questions in the matrix about how we do prioritization, and I think this helps to answer that, but maybe it doesn't need to be in here, but we can revisit it while not referencing it. And then if it becomes something, we could put it back in.

Yeah. Council member Forsyth. I would agree with that. I think removing it for this year, since we haven't had an update, but I definitely don't want to lose the community strategic strategic plan as a tool because it is so much more digestible for the general public.

Okay.

Thank you. So the recommend or the proposal on the table is to replace the reference to community strategic plan with a reference to the comp plan and continue to have a conversation about the tool that can both center the council and communicate succinctly to the community some of the priorities. Other thoughts? Oh, a big thumbs up from council member Soni and a few others. So it looks like we have a decision on that one. Thank you team, I really appreciate the patience.

All right, the next one. Is the community results team. So can you go to the next slide for me? So the community results team, I've provided a table of sort of how we've utilized that group in the past. After the 2019-2020 process to develop the 2019-2020 budget, we had a really great debrief with some we called them frequent flyers on our civics results team is what we called it at the time, who came in and helped us identify what worked well, what didn't, you know, feel that it added value to, you know, the time that they were investing versus what we could actually react to with the feedback that they gave. And then the next year the pandemic hit and we were in a much different situation. So the 2021-2022 budget was the first time that we had done something online with the community and it was by far the biggest turnout that we had received. So prior to that, I think we would max out at maybe 14, and by the time we got done, it was maybe 10-ish. And with what we did in 21, 22, we had over 30 and really engaged. And so since that time, sort of had been trying to mimic those types of exercises because we got a lot more feedback and investment. But that's where we are. That's how we got to where we are. And want to just make sure that as we queue up for either next year, opportunities that council is seeing and they want to ensure we've got some community involvement, or if we just want to look at how we do the community results team differently. I know council or FAC chair and I have been talking and we discussed potentially that that work occurs in the non-budget year so that it feeds into the budget. So just want to get an idea of what it is that you'd like to discuss, ideas you'd like to consider, or if you have a decision tonight, that is great.

Thank you, and for reference, it looks like this has bumped a page, so it is on, this topic is on page 22, bleeding into page 23 of the long-range financial strategy. Council Member Kritzer.

I feel like I'm sharing a lot of opinions in this conversation, but I haven't been thinking about a lot of this as FAC Chair, so I will, I'll just note on this one that I, Director Cochran mentioned it, but I do think seeing that we have had moments, even in recent years, where we have asked people to engage, we have gotten a good amount of response. And in the last two years, we've had a bit of a drop off. I do think that the actual scoring and ranking of the budget offers, when I have seen those, were really valuable. and just making the budget decisions. And if we wanted to, I think one of the things that we've been talking about this year around community engagement is how do we make sure that we get a real diverse set of perspectives into this group so you're not getting just the same people who always raise their hands. And so one thought that I would have is if we wanted to, especially for next year, even include in the budget that we're going to look at, a budget offer to help us to go out and proactively recruit people from a diversity of our community during the first year of the biennium next year, to be able to join this team, have time even maybe to train them up so that they can get background on the city budget and some of the history of it and some of these policies, right? So that then can enter into a kind of thoughtful dialogue around what's going forward as well as, because we know that once we get into kind of the budget year, things are already in motion. So if we actually wanted to come up with bigger ideas that we hear from our public saying, we want to, we really want to see, we don't see something that we really want that is new. If they bring it up already mid budget year in the budget, it's harder to integrate versus if it's the year before, then the finance staff and the council can think about how do we integrate that? What kinds of trade-offs do we want to make, et cetera? So I guess what I would advocate for is like, Community Results Team 2.0 and to have that as a goal for the future, but to really cement the goal to maintain a Community Results Team as part of these strategies.

Thank you. Other thoughts?

Council member Forsyth. Thanks. I definitely appreciate the idea of having this team be in place earlier. That way the process is just much more smooth overall, but at the same time, making sure that we are still able to be nimble when new ideas come up and new issues arise within our community that we're able to adapt quickly and not get caught up in our processes too much. But knowing that, what where we were and how far we've come i definitely appreciate how we're talking about these things much earlier in the year we're not like cramming it all into two three months towards the end of the year and uh we're being a lot more thoughtful so i i love the trajectory we've been on for the lot since my time on council um but just making sure that we're still building into whatever process that we can adapt quickly as we have multiple times over the past couple of years and saying, okay, now we're seeing this new need arise. How can we adapt in the budget for what we're seeing in community? Thank you.

I'll go ahead and chime in. I think there were a few questions in the matrices about these. I certainly flagged this because we did not use this team this year, so there's a question of compliance with our current policies. I'm very much in favor of keeping this in the policies and pursuing this as a really powerful tool. I love some of the ideas that have been shared. I would support a a budget offer to help us set that up next year and to really make sure that we are able to use that team to get a broad cross section of our community engaged. I do think it pairs actually pretty nicely with the program that we've been discussing and the mayor gave a preview of with us earlier in the year regarding civic education, civic education or civic engagement right now. I mean, when we have an opening on our boards and commissions, we're getting dozens of applications for every single one. And we had lots and lots of interest in our vacancy earlier this year. I would love to see the civics results team be a coveted team that lots of folks want an opportunity to serve on. So to that end, I think that the language, the refreshed language on these pages does make a start at it. The council might be interested in specifying a bit more about that, but it could start with a budget offer to help us get set up next year. But I'll leave it at that. Avid support for bringing it back and growing it and its sophistication.

Great. I will work with council chair Kritzer on kind of identifying what a budget ask might look like from a staff perspective and leave it to you.

I only have three counted so far. So let me make sure that we have council majority to move forward on that. Is there council majority to move forward on that plan? Okay. Awesome. Thank you. Really appreciate that.

All right, so next one is an item that was requested by council member Kritzer regarding one of the policies listed for our general obligation bonds. So this was a policy that was added while we were discussing the issuance of bonds for the senior center. And there was concern by a former council member that we would not want to borrow for one project for more than 50%. So of the total project costs. So we did put the policy in place. It is still in place and Council Member Kritzer would like to revisit.

Council Member Kritzer, would you like to say anything else?

Yeah, I guess I would just say I think we put this in place. It was at a time when we were facing a lot of financial uncertainty and there was a lot of discussion about these issues. In my opinion, we already have a lot of limits from the state government in place on our opportunities to be able to access capital. We currently are so far below what would be our debt limit. And so this policy kind of puts an artificial limit on what we could do if we needed it in terms of bonding. And so I would propose that we take this policy out because it's not required by state law And I think it does create limits for the council and for future councils in needing to put something on the ballot in order to access capital when we already have other things that limit our ability to access other capital.

Thank you.

I appreciate that summary. Council Member Parsi? I'm curious if there are other...

Are there regulations around this that you can educate me on a little bit more? For example, what if the debt goes beyond the lifetime of the actual capital projects that we have? Is that something that we can protect ourselves against, or is that something that we wouldn't do that, and we wouldn't be allowed to do that? Yeah.

Council Vice President? Given my remarks that I had made earlier about what what indicators are showing. While I understand the sentiment of revisiting this, at this time I would not be in support of lifting the limitations. Even if we still have state limits that are going to limit the amount, I would see it as a sign of good stewardship at this moment. you know, to where we're not going to be leveraging, you know, over leveraging debt and not taking that on to where then our contingency plans are that much stronger.

Councilmember Forsyth. I would tend to agree with Councilmember Nueva Camino on on Exactly what she just said I would however entertain potentially raising the percentage slightly if that would be Something the council would want to discuss I'm open to entertaining that but I do appreciate having this as a general policy and Just to we don't know what the future looks like right now and everything is very uncertain So I'm still supportive of maintaining this with potentially a minor tweak Councilmember Kritzer and then council member Parsi I definitely if if the council didn't want to remove this and would be up for looking at different percentage because I think if we think about the

say, upcoming projects where we may have the capacity to bond for more, and we also have the funding sources to pay it back, but it gives us more flexibility in a moment when there might be really good rates for borrowing, like thinking about a project like the MOC or other types of projects, teen centers, some of these other ones where it just may make more sense to borrow more at a particular moment. Without having to go to the voters, at this point, we would just say, oh, we can't borrow up to a certain amount, and there isn't, I think, that clarity. So I would say either increasing it, but I would say maybe if we want to revisit this a little further since I kind of caught this as I was doing my review before this session, I would also be interested maybe if we wanted to come back on this to hear from finance, maybe we could look at any other cities that have a policy like this, or if it doesn't, exist comparatively in other cities because I don't believe when we made the decision, it was based in what was generally the recommended practice for cities. So I do think we should look at what are the actual recommended practices for cities to be able to make the policy based on that. So I would just ask if we're looking at that, we could look at both increasing the percentage, but also kind of the comparison.

Thank you. Council Member Parsi, and then we'll go to Council Members Soni and Prakriti.

I would love to know if there are projects that we anticipate that this would be blocking us from doing. And if so, that way we can, if we evaluate the percentage, we evaluate it knowing kind of rooted in data rather than kind of just, you know, Putting a different number.

So just in general, just my personal philosophy is that I would not borrow more than half of a project because one of the biggest risks is not spending the debt proceeds that you've issued and so to borrowing such a big portion of a project and you are all learning and are well aware of sort of all the knowns and unknowns when it comes to capital projects and the risks and the things that can cause delays. So I try to when issuing debt sort of include a number of projects and a little bit of funding for each one of those projects so that first of all we have the flexibility to move it around and make sure we spend it when we need to and it's just a better mix for us. So I don't typically, I would not go here first. And I think that if there was ever a need, an emergency or an exception, I would bring that to council and just say, can you let me break the rule like this one time? Or can we modify the policy? So I would bring the policy probably back to council if I felt that there was an exception.

I said we would go here. Mayor Burney also had a comment, and then we'll go to this side of the table.

Thanks. This is an interesting discussion. I appreciate Councilmember Kritzer bringing this up and Councilmember Parse's comments, and as yours, Councilmember Forsyth. This was not based in any... How this came forward wasn't based in any kind of data or best practices or anything like that. I think it would be very interesting if the council is interested to revisit this And perhaps it might not look like this, but what are the policies that are in place to ensure that we can borrow and pay it back? And what do those policies look like versus this very, I feel like limited look at how we do that. And that might be more informative, not just for the council, but also for the public to understand when we go out for bond, what we do.

Council Member Soni. Actually, my question was partially answered by Council Member Parsi, Director and Mayor. I was actually about to ask if there is some data from the past that we can see. So, you know, as I hear that we do not have that data, there is no best practice that has been established. But putting it for a voter approval would definitely going to impact a lot of our capital projects. We don't know how things are going to be and sometimes it's hard to you know, have funding already and then on top of that with this restrictions, it might just create some bottlenecks. However, having this as a policy might be helpful. So can we go a little conservative at this moment and put up with maybe an increased number? or can we wait to see our budget, how that goes, and then, you know, maybe take some decision on this policy. Anyways, we are not taking a decision tonight, but, you know, maybe once we have some of that data looking into our budget, how we are doing with all our capital investments and everything, and maybe we can extrapolate. Some of those inputs might be helpful for us to take some of that decision. Thank you. Council Member Prakria?

Thank you. So, so my understanding with this current provision is that for the amount of time this has been in every single capital project has been financed, um, majority through existing cash we have and not through bonds. Uh, just, just based off what we have. Okay. Um, I would be interested in, in raising the cap here, but I would definitely want to see numbers, um, before, before we, um, made that decision. And I would also want to consider it in conjunction with just jumping ahead to the next item on the operating reserve level, especially just with, if we're going to make, if we're going to still have that change in there, raising from 9% to 12% and that and the MOC, I'm wondering if that could put pressure on our current budget. So I'd just be interested to see the numbers of this not just in isolation, but also in conjunction with the next item we're about to discuss.

Thank you. I think that may, okay, I'll let the Vice President chime in and then I think I have a solution for us, but go ahead.

I would be supportive of raising it slightly. My concern remains that if we're going towards the direction of a recession, then the cost to service the debt is going to be lower. However, then we have higher costs, higher needs. We're not going to have properties exchanging hands as quickly. So while it can look like, oh, well, we can service our debt on the cheap because of what's happening with rates, that is compelling. However, when we kind of come back out at a more macro level and we take a look at, okay, but what else is happening at the same time? And that's why I'm cautious.

Sure. Thank you. Okay, so not hearing that we have support to strike this item in this current version, it does sound like there's enough interest around the table to revisit this in 2027. There's an earlier edit in the matrix that we will review these policies in Q2 of non-budget years. So it sounds like we would come back to this in early 2027. Does that sound like, potentially with reviewing some additional data, Council Member Kritzer, is that how you heard the conversation land?

Sure, if that's where the council is. I wasn't sure if there is an opportunity before we finalize this to get any more information to make an edit in this version, but if we got some information. Because I was hearing from the council there might be interest in at least in this version revising the percentage, even if we were to revisit it. But I'm also happy that that's the majority of council and support looking at it later.

I appreciate that. Again, I'm not sure about the timing, but I hear your interest. I hear it. I saw another hand here, Council Member Forsyth.

Yeah, I think reviewing in 27 makes the most sense to me. Plus, I have questions about without voter approval, is that 50%? What does that look like? We haven't even entered what the voter approval part of that would look like.

Okay, thank you. I think there's interest in coming back to this item. And I don't know if we have the time to come back to it before Q2. I will also say the revisions to this section that start on page 15, some of the questions that came up around the table. I wanna recognize Council Member Kritzer because this is only a question who comes up from someone who's been through the budget cycle a few times also. And I appreciate our senior council members really digging in on this. For those who are about to endure their first budget cycle, we are starting with the capital improvement program on September 8th. So being familiar with these policies that are guiding the funding decisions there, this is going to be really helpful. And of course, you'll have the minute we approve the budget, you'll have lots of opinions about how we should do it differently next time. So you will have that opportunity too. But with that, I think we will move on from this item. And I appreciate Council Member Procrea for making a smooth transition for us to the next topic.

Next is about our general operating reserves. So right now where we are is in 2022, a policy decision was made to increase us from 8.5% to 12%. And so we have been working our way up to the target level since then. Right now, for the 25-26 budget, we are at 9% and we are hoping to be at 10% for the 27-28 budget. What that means is an investment or a transfer of about $4.1 million from our general fund surplus into our operating reserve. So that's about how much that 1% is just to kind of let council know what we're looking at. And then of course there are competing needs. So, you know, there always are. And so I really, I, You know as your finance director feel that investing in our reserves and sticking to that policy is really important and looking at some of our neighboring jurisdictions that Weren't as weren't able to manage the pandemic as we did or have become reliant on one-time funding and reserves, it makes sense for us to do this, but certainly your perspective and happy to listen.

Council Member Forsyth. Having gone through that pandemic process fully in support of maintaining this. Council Member Parsi.

I would love to know a little bit more about what we would have to give up to do this, so we have a better understanding of the trade offs that we would be. You know i'm expecting with this but i'm definitely in support if it makes sense and based on your recommendation and the support of the Council.

So I would say that typically what we do with our general fund surplus is it is invested into our capital program. So top priority is that it goes to reserves to either replenish what we've used or to increase our target, which we're doing here, or we most likely would utilize it for capital. So that's, you know, it's one-time money. It maybe would pay for a study or something like that, but we wouldn't keep it in the general fund to pay for operations. So it would pay for something that is also one-time in nature.

I think Council Member Soni, did you have your hand up? Okay. Council Vice President?

I'm completely in support of moving towards 12%, and curious is 12%. our goal number, or do we have a goal that's higher than 12% for looking forward?

Our goal is 12% at this time. That keeps us in alignment with best practices that GFOA updated. And so that's why we saw this shift and are moving towards it. So 12% is our target right now. That's 45 operating days and sort of what we're considering sufficient. We also, just to remind council, we have what's called an economic contingency that's held within the general fund that even gives us a level of ability to respond to community needs before we dive into reserves. And we've also been working to increase that.

Chair, I have a follow-up, if I may. I know that there's surrounding cities that will lean towards a 60-day. How did we arrive on a 45-day reserve?

That was done by our former finance director and at the time it was heavily influenced by GFOA and their recommendation.

Thank you.

Yes. And the economic contingency and general operating reserve both require council approval prior to use and cannot sustain city services for longer than two years. Council Member Kritzer.

Just a small note is in In this policy, one of the sub-bullets that shows up in the policies is that the city is increasing the level of reserves each biennial budget. It's currently at 9%. It feels like that makes this document very point in time, whereas I think it's supposed to be ongoing. So I wonder if there's a way to reword that that says, you know, if the city's budget is not, or if the city is not yet at a reserve level of 12%, that we will gradually increase each biennial budget until it reaches. Because I think the one part behind that, which I remember when we decided to make this change, we didn't want to say, okay, let's just go to 12 and then we have to make the trade-off Council Member Parsi was talking about of like, oh, we put so much in the reserves, we weren't able to budget for things we need now. So making sure we do that gradually So we're balancing what we need to spend on today with creating those reserves.

Okay, thank you. Council Member Procrea.

I'm generally in support from what I could tell. I think we are lower than many of our neighbors. I believe Bellevue has a 15% reserve rate. I wasn't able to find information about Kirkland, but I think I would be in support if Bellevue is able to have maintained a 15% rate over the last few years. I think the city of Redmond can get to 12%.

Okay, so hearing broad support around the table for the maintenance of the 12% and would like to check in on how does the team feel about the revised language offered by Council Member Kritzer to kind of take care of the temporal issue because this again is a document that should be lasting. So it currently reads that the city shall maintain a general operating reserve at 12%. Instead of the second bullet point, it could have language indicative of When it's not at 12%, it steadily increases each biennium until 12% has been restored. Seeing some thumbs up and head nods. Still thinking Council Member Forsyth?

I feel like it's just duplicative because we're already working towards that. So I don't see the need to add the additional language knowing that we're on that trajectory already.

Are you okay with striking the temporal reference to the current 9%? Sure. Okay. So I think we have general direction on that one. Okay. Thank you so much. Really appreciate it, team.

And the last item is our community investment rate. Haritha's gonna provide you with an overview of what it is, how we've established it in the past, and what some of the options that council has when looking at the community investment rate. And then we can determine the appropriate timeframe for those conversations. So Haritha, I'll hand it to you.

Thank you, Kelly. As Kelly said, this is a council request item. There were several questions in regards to what is this, how is this calculated, what does it tell us about the city and the community? So I have put together a lot of data, so hopefully some of those or all of those questions can be clarified this evening and we can, as Kelly said, we can kind of decide where we want to go from there. So what is community investment rate? It provides a high level measure of the portion of the community's personal income invested in city government. This basically measures city's revenues as a percentage of community's personal income. So generally just the dollars itself will not let us know if we are charging the right taxes or collecting the right revenue from the community. So instead, we track this number, basically city's revenue as a share of what everyone in the Redmond earns combined. So that number does five useful things for us in the city. It gives us a steady way to measure how big the city government is. It lets us look at the trends over many years, over the time. It also puts our revenue next to the local economy instead of looking at it as itself. It helps us have an honest conversation about the taxes and whether it is sustainable. And most importantly for today, it helps us figure out if it is affordable. So how did the city come to this threshold or the target? It's a long time ago, I believe it is in 2009, where council has adopted this target between 5.2% to 5.5%. And this number is not kind of taken randomly. It came out of a lot of evidence-based data and community feedback. So first we went back and reviewed the historical revenue collections from 1997 to whenever this rate has been established. And that review identified a sustainable historical range which approximately came between 5% to 6%. And it also incorporated the community level of service expectations when we are building this rate. And finally, council adopted a target that balances these three things, which is affordability, long-term financial sustainability, and also the community's level of service. So I wanted to kind of emphasize this rate itself doesn't say that we are doing well or we are not doing well, or we are charging right taxes or we are not. There are several other metrics which kind of inform our budget, our funding, our revenues and our costs. So it is this rate is very useful when it is paired with other metrics which is listed here that answers three major questions which is can the community effort the city government as is or and is the community actually receiving the value in what it has invested in the government and is the city government financially sustainable over the long period of time or long term um so the community investment rate tells us how the community invests in the city government and the community satisfaction so this is the sorry let me back up so this is the financial board these are other metrics which complements the community investment rates. So one of them is which we are talking today which is the community investment rate which tells us how much how the community invests in the city government and the community satisfaction survey tells us how the community perceives the value of their investments and strategic outcome measures which the community is providing feedback on right now tells us what the investment actually achieves. And did that money translate into the results through those measures? And financial sustainability indicators tells us whether the city can keep this up over a long period of time, not just for today or this month or this year. And also benchmarking with other jurisdictions or other peer cities tells us how we compare similar jurisdictions facing the same budget pressures. This graph kind of shows a lot of data from 1997. So the three lines that you see over here are tracking three different revenues. The green line shows all revenues, which include the one-time as well. And the black line shows all taxes, fees, and charges that the community pays. And the blue line shows all taxes, which include sales tax. utility tax and property tax. So some of these, as you can see, like there are some peaks and dips over here that is primarily because of some of the one-time revenue that we have received during recession in 2008 and some of the grant revenue during COVID and other times. And you will also notice as, oh sorry, let me back up. So the red line or the red band is the council approved ban for the community investment rate. So when you look at these lines, you will see that there is not like a straight decline. There is a gradual decline since 2015. To make that more concrete, I have put together some boxes. in this graph, which kind of talks about different averages in different time periods. So over the full 29-year history, which is from 1997 to 2025, Our average rate is about 5.04%. And looking at just last 15 years, it's 5.16. A little bit over than the average from the 25 years just because probably of the one-time revenue that we have received. But from there, as you can see, as the window, the time period shortens, the 10 years average shows 4.95, five years shows 4.53, and the last three years, 4.35, and our forecast from 2026 to 2032 shows 3.68. So every time we shorten this lookout window, the rate has been declined. So the natural question after you see this would be like, why is this happening? So hopefully my next slides will answer some of those questions. So the community investment rate includes some of the data that calculates the community investment rate is also the population. As in this graph, you can see that the blue, this kind of shows two different things. One is the revenue. The blue bars is the ongoing revenue and the yellow ones are the one time. And the green line is the population growth in Redmond. So Redmond's population has grown from 42,000 in 1997 to more than 82,000 right now. So it's doubling its size. So what does that mean for the city? It means more residents, more services, demand, and also more revenue base. So over the same period, the total city's revenue grew from 72 million to 320 million. So that's about like 340% growth in the city's revenue. So by normal measure, that means that we are doing great, it's very healthy, growing city, growing revenue base. It sounds very reassuring, but the reason we are here today is that the income per resident is actually growing even faster than the revenue base for the city. And that is what the community investment rate, and that is why the community investment rate is declining. So this slide doesn't kind of say anything. It basically says our revenues are increasing and it is just the data that I wanted to show you guys to kind of understand how this data impacts the community investment rate. This is another data which talks about the community income versus city revenue. So as you can see here, the green bars are the community income and the other three lines are the revenue, the city's revenue collected since 1997. As you can see, the community income has been steadily increasing over the period of time and the other three lines barely kind of catching up or pacing up with the community income. That gap shows the entire story of the community investment rate and why that single percentage doesn't tell the whole story about the city's revenue. As you can see, 1997, just to kind of give a little bit of data, in 1997, we have the community income was about 1.3 million, and the total income for the city was about 72 million. And by 2032, we are projecting that the community income will grow or earn to 9.8 billion, and the revenue projected is about 341 million. So the community got nine times richer and the city didn't come closer to keep up the pace with the community income. I wanted to emphasize that, you know, as you can see, nothing in this chart is going down. Everything is going up. All our revenues are going up, and also the community income is going up. This is primarily I wanted to show how that gap between our community income and our revenues is. All right. So in terms of the forecast, how we reached those, how we kind of build that forecast and some of the key assumptions that we have made is that we based it on current levels of surveys. There are no assumed cuts, no assumed expansions, and from there, some of the other key drivers are property tax, our most stable revenue. We can increase it by 1% every year. And then all the other taxes are assumed to grow between 2% to 3%, and other fees and charges grow at 2% per year. On the other side of the equation, population is assumed to grow at 1% per year and the per capita income growing 3%. That's the CPI rate I have given on an average at 3% per year. So what does that mean, what does this declining rate, the community investment declining rate mean for the city? And how does this impact our city? So I wanted to just walk you through and give you, hopefully give you some examples for each of these by impacts. So the first one is the city's capacity to fund new investments related to what the community could support will shrink. So think about this as like if you're thinking of a new community center or new MOC, or any new expansions that we wanted to do, these kind of projects residents could ask for. We have heard that during our community engagement, not that they wanted new investments, but we have heard that all the investments that we have made were great for the city. But these are something that community will expect as a city to invest, but those are just examples. I don't want you to think that that is what we have heard. Each biennium, we are technically able to fund some smaller share of those investments, but this kind of shows that the city's capacity to fund these new investments and the community that can support this will shrink. The second is if the city's revenues don't keep up the space with rising costs and service deliveries come under the pressure. So take something like software investments that depends on permitting our D365 enterprise system, public records. These are all vendor raising licenses fees, but we are not pacing up with the revenue with the costs that are rising. So I would like to point out that the investment rate only measures the relationship between the community income and the revenue, the city's revenue, and it says nothing by itself about the costs that are growing in the city. The third is, just want to remind that this rate is the citywide average rate. It may not reflect every resident's actual So, I mean, if there are two households, one is a steady income and the other is moving from to do a tech job. So those two different income levels are impacted with this steady community investment rate. And the fourth is actually this is a positive impact. So lower revenue to income burden ratio signals a strong economic base and extra fiscal capacity. So that's exactly what the bond rating agencies will look for, how our economy is doing, how we are doing. And they could rate, I mean, we're already at AAA, but they actually see this data to rate our cities. So that actually is a good impact. And the fifth one is public perception risk. So there is a risk. This can create misconceptions if the rate keep on decreasing and we are not showing that we are reaching that rate based on the council's 5.2 to 5.5. This can create misconceptions if we don't explain it clearly to the public. A declining rate represents economic growth outpacing city revenue and not a reduction in city services or fiscal health. So what can we do about that? So these are different options that I've put together for council. So one of them, the first option is probably do nothing, no change in the community investment rate. But the problem over here is we'll continue over the years, we'll keep continue missing it. We'll never reach that target as you can see in the forecast. We'll never reach that target and we'll continue to miss that. The second is look at our revenue-led decisions. Are there any, evaluate whether there is affordability signals to support any additional taxes or assess whether additional revenues are justified by service needs rather than solely by a metric itself. The other one I added over here is service-led corrections. This is not something that I would recommend. I added here because it's a natural assumption. If we cut costs, can the rate change? But that doesn't happen. If we cut costs, the rate actually declines more. I just added for the public and the council to understand that this cannot be an option at all. And the last option is to recalibrate the target. We can do the same thing as we have done 10 years or 20 years ago to recalibrate, re-look at our rate if we are really having the right rate. And then look at our, there are several, this is a tool and there are several ways to recalibrate this rate. So we can take a look at it and revisit this rate and change the rate. to pace up with the community income. So I just want to end this by saying that what I have done, what I have, when I was looking at the prize of government book by Osborne and Hutchinson, it doesn't say that the rate being higher or lower tells you if you're doing correctly or not. It doesn't say raise high rate, I mean the investment rate to high or investment rate to low. It never argues that higher or lower is better or wrong. So what it actually points out is to buy the results people want at a price they are willing to pay. And there is no one number that we can say this is the price that they are willing to pay. There is a lot of data that comes in that is used to build that rate. And there is a lot of community involvement. There is a lot of historical data. And that is how we build this rate. So I just wanted to end that we want to see if it really choose this number correctly, and if we did not, then what can we do to recalibrate this target, or what can we do to make sure that we are asking the right price from the community? That's all I have. Thank you.

Thank you, Deputy Director Nara. We appreciate that. There were a lot of questions and curiosities in the matrix about this topic. So with that, who would like to kick off our discussion of the community investment rate?

Council Member Soni.

I just have a question about the community income. How are we calculating that? Like revenue seems to be pretty straightforward, but just want to ensure that we are calculating even our community income also the way.

Sure, this is the data that I get from the King County census, not King County, sorry, labor and industries. And the simple math is multiplying the population growth to the per capita income. In Redmond.

Yeah, Council Member Prakriti?

Thank you, Deputy Director, for the presentation. And I think kind of my thoughts on this metric were kind of what you were getting at, where this is something good to track, but not necessarily something that we should aim for, largely because from what I can tell, we basically don't have much control over it as a whole. I mean, I was just looking at the pie charts on our budget again, and we don't control a lot of our budget, even an item like sales tax, right, is like 0.85%. of the 10% sales tax is actually controlled by the city. So I guess those are my general thoughts on this rate. And then just anecdotally, a couple of small things. Sorry, this is not important at all. I just, I can't. My eyes just perked up. I think a couple of the numbers are slightly off so far as the percentage growths here on the slides. Like slide 29, the revenue growth from 63 million to 320 million should be over 400% instead of 340. And there was one other that I'm forgetting. But so far as the actual... community investment rate, I think, yeah, good number to track, but we don't have much control over it.

That's correct. And I'll take a look at that math. Thank you for pointing that out.

Council Vice President. Thank you. I'm really happy that we're having this conversation because it's an interesting issue for Redmond, for any city to have. We've got very diverse socioeconomic levels in the city. And we've got, I'll call it localized inflation because we've got some fabulous employers in the area. And the difference or the change between some of our lower income households and the top end of our households is pretty drastic. And how do we do it in an equitable way? And I I'm glad that we're having the conversation so that we can start wrestling with what could be, I'm not making suggestions, but what could be solutions as we move forward? You know, does that look like a graduated, if any of these large companies are listening, I'm not making this suggestion. I'm being courageous and putting out possibilities. But, you know, does that look like a graduated business license for our larger employers? Does that look like that we revisit a levy lid lift with household protections, you know, and is that what is possible, you know, speaking to my colleague, Council Member Pacrea, we don't have a lot that's in our control, but what are our controllables and how can we influence that to where it is equitable? And to his point, I don't have the answer without the data of is the current rate, is that the right size? I don't know, but I do know that we need an equitable approach to it. Thank you.

Council Member Kritzer?

I appreciate the walk around this. I would just say in terms of the options that were laid out, I think it would be interesting to look at that benchmark rate I would be hesitant to make a change at this point until we could assess all the implications, especially if we were to be moving it lower because then we might be creating future arbitrary limits. We've seen these trends based on the current economic conditions, but they can change. And I'd rather be, I think, lower than higher. So I don't want to end up in a situation where we're forcing ourselves to go over the community investment rate.

Council Member Soni? Actually, not a question. This is a comment. I believe one of the slide where you have these rates was missing in our agenda packet.

Missing, sorry, what?

One of the slide that you have actually presented was missing from the agenda packet. So maybe if you want to connect. Okay.

Yeah, I'll add that and resend it to you guys. Thank you.

I'll go ahead and chime in. I don't have strong feelings for this budget cycle. on making a change. I think this is the best education and conversation we've had laid out on this ratio in my time on the council. Budget balancing is already underway and I can't imagine that 5.2, 5.5 was written on the wall and like every decision was made to reinforce that number. So I appreciate that it is one of the values that we are tracking. I think that the questions that the council vice president is wrestling with are really good ones. And they're not unrelated to some of the work going on to make sure that local governments can have more equitable tools to create revenue, more progressive revenue. And that's, as I've shared in my committee reports and whatnot, that's a topic that I'm pretty passionate about. And I think there are more creative solutions, the more that things settle at the end of the year on some other things. So really appreciate that we are willing to center equity because no, first of all, it's a community value, but no household in Redmond has the same income as the household next door. And in a community that has as much equity Diversity as we do, this ratio is becoming a little bit more less useful for us with each passing biennium. Council Member Percy.

I'm curious for the scenarios you listed if you would be able to add pros and cons for considerations as we evaluate them and also provide recommendations and timelines that you think might be best time for us to evaluate changing our strategy.

Thank you. Council Member Forsyth. Thank you. I really appreciate the deep thoughtful conversation on this because it is a very top of mind concern about affordability right now for all families across our region. So I'm in agreement with not necessarily reevaluating this right now, but understanding more deeply the complexities of how we evaluate this with equity in mind, because I'm hearing a lot of those conversations, especially around property tax. And given that we only have so many limited tools for balancing our budget, I do think that a deeper dive next year into all of these options is very warranted, and especially considering the overall inflationary factors that we're seeing year over year and it doesn't look like that is going away anytime soon.

I would suggest that we kind of hit the other topics early in the year and wait for this one once the year has closed and we have actuals for 2026 and can start putting some meaningful data and decisions in front of you. Definitely before the end of the second quarter.

I appreciate that, Director Cochran. And one of the topics that's come up a couple times tonight is being inconsistent with our current policies. In the draft that we have in front of us on the long-range financial policies on page nine, I do appreciate that the staff have already added a couple paragraphs just about this cognitive dissonance. And while that does create a bit of a timing issue restriction in the policy itself, I think that the discussion is important. And absent these couple of paragraphs, it would feel incomplete. Do others have any comments on the language or direction on that? Seeing some head nods of appreciation, Director Cochrane and team. Any other thoughts on the community investment rate? Sounds like we'll be coming back to this conversation after 2026 closes. Okay, any last call for other items that were in the matrix for these items that you wanted to make sure we could discuss Council Member Forsyth?

Not for last call on this, but I'm gonna put in my plug early for a budget binder printed.

She loves her printed binder.

I do love my printed binder.

She's the only person I saw handed something with a face mask too.

Sina, were you raising, excuse me, Council Member Parsi, were you raising your hand for the same issue? Oh, okay. All right.

Okay, anything else, Director Cochran? No, thank you so much. What you'll see next from me is I'll propose a roadmap for 2027 to make sure that we are hitting sort of all of the topics in the order that we discussed and you'll know what to expect next year as well as the community. And this is exciting, thank you.

Wonderful. Thank you. Could we get one more copy of the long-range financial policies? You have a whole stack. Thank you. Very much appreciate that. And thank you for the team who was able to be with us tonight. With that, our last item on the agenda tonight is council talk time. We did want to kick it off by honoring the man, the myth, the legend, the one who makes us look so good on camera. I have been warned that he's a bit humble about his retirement, but the council did want to wish him well. We do have a small gift for you, Chip, if you would like to come out and receive it. And if not, we will come and say hello in a few minutes. Would anyone like to say any nice words about Chip?

Council Member Forsyth? I would love to say nice words about CHIP. It's going to be so weird not having CHIP with us every night, every Tuesday night moving forward. I do want to acknowledge all of the hard work here very late, making us look good, making us sound good so the community can see our meetings and access them on YouTube, on Facebook, all the various ways, always responding when a community member reaches out and says, something's not working, always making things work well. And just for my own personal note, Chip was the first person at the city that truly made me feel very welcome in this space. And I just very much appreciate that and the energy and dedication he has brought to the community.

Absolutely. Thank you so much. Council Vice President. I want to just acknowledge like we there's there's so much that we experience of Chip, but there's a gazillion and three things that that he takes care of and handles that we're not even aware of. The thing with producing something live is how how nimble and how graceful can you be to cover up when things go Not as planned and chip has consistently done a fabulous job at that, so thank you. Thank you, Council Member critzer.

i'll just say that. chip. Who, for the listening public is the it person behind all of the the magic of our televised meetings and all the tech here. and has been for a long time. Mayor Bernie can tell us probably the number of years that he's been here, but an incredible amount of years just embodies, I think, everything that we value in Redmond of community, of collaboration, and of commitment to service. So just want to appreciate you, Chip. Thanks. Thank you.

Mayor Bernie. I actually don't know how many years Chip has worked for the city. He's been here as long as I have been here, which has been a while. There are many stories of all kinds of things he has recorded that have been in particular on RCTV over the years. I think there was like a series he did with Melissa, our COO, Melissa Files from years ago. We haven't dug those out. He wanted to go quietly, but I do very much appreciate everything he's done for the listening public, all the videos of late, all of the different things that we do to make sure the community knows what's going on, the images, so much he's done with just such heart and creativity, and I will miss him very much. Wish him all the best in his retirement. And he can always come back and say hi if he wants to, or maybe maybe share with us how we can improve how we're doing our videos. I don't know. But I know he's, wish him all the best. He's really well-deserved retirement.

Well, thank you, everyone. And congratulations on your retirement, Chip. We have just a couple other items, announcements for council talk time tonight. We of course have a special meeting on Monday of next week, and then we will recess until Tuesday, September 1st. Next Tuesday, we have national night out. Please respond to the emails from the mayor's office to be scheduled to visit your community meetings. We also have three Rocket on the River concerts in the month of August. Council will be in recess, but if you are around and would like to come have a good time or the public would like to join us, August 5th, 12th, and 19th. Also, we have another retirement to celebrate on August 18th. I know it is in the middle of the recess, but I will be there to represent the council and to share our well wishes with Director Helen. Council leadership spoke with staff. We do have a plan moving forward to screen and interview and make a recommendation on the legislative coordinator, so that is something that we'll be working on toward the end of the recess. I saw another hand, so we'll go to Council Member Forsyth. Thank you.

Yes. Earlier today, director Helen and I briefly chatted about convening the tenant protection subcommittee and working on that FTE position. So check your email for meeting scheduling in the next two weeks, weeks ish. So make sure you're checking it because that might overlap with a little bit of recess.

Okay, Councilmember Parsi.

We recently had some big community investments with Derby Days and with World Cup, and we tried a lot of different engagement opportunities with the community. So I was thinking that when it comes to the next year for planning Derby Days or the next World Cup event, that is a big event that can happen nearby. I am curious if we want to do a short postmortem to understand what were the successful investments that we had that we might want to continue? What were some of the investments that maybe didn't work out so well that we want to change our strategy next time around? Is that something that council would be interested in hearing or is that something that we can get updates about?

I appreciate the question. So on World Cup, that is coming in Q4 with the economic development staff, the review on those investments. We could absolutely have community engagement as part of that. The Derby Days debrief, we typically do in the Committee of the Whole that we actually had earlier today, but it is an annual process that we do. So we could do it at a talk time or potentially at the September Committee of the Whole meeting for parks and environmental sustainability. Is there general interest in having a debrief on Derby Days as well as the World Cup investments later in the year? Okay, so Chair Soni, could we leave that in your good hands to have a short debrief on Derby Days and other community engagement at the end of your committee or in your committee next month?

Yeah, sure. I believe, like, you know, we have to also wait for the staff to consolidate all the feedback and the reports so that we can do it together. Awesome. Okay.

Thank you. Chair, excuse me, Council Member Procrea, you also had your hand up.

Thank you. And I just wanted to briefly share for transparency and for my colleagues and for the public that during the council recess, I will be in Washington, D.C., working on AI policy for the Senate under the leadership of the ranking member of the Senate Commerce Science and Technology Committee, Senator Cantwell from this state. But I've made sure that none of my work for a different federal agency will conflict with my work here in the city of Redmond.

Wonderful. Best of luck. The rest of us will be on vacation. No, I'm kidding. Have so much fun in D.C. We can't wait to hear about your experience on when you get back. Anything else? Councilmember Soni.

I want to talk about in the light of the heartbreaking incident that has happened in City of Seattle at the Seattle Center during the Light of Seattle Festival. Whatever has happened, my heart really goes out for the families that has been impacted, but this is also bringing a question for us in City of Redmond, that how we can reinforce our own safety and how we can strengthen our partnerships with the regional intervention networks, how we can provide the support for our youth and families, and how we can proactively invest in the community-centered prevention strategies. Our anti-crisis subcommittee is going to meet next week, and I believe it will be a good discussion point in even for our subcommittee to start looking into some of these things because the way that these these incidents are happening it's a it's also awakening call for all of us and we have to be proactively ready and ensure that we are able to give the right education mentorship to our youth and we have wherever it's needed we need to partner with the schools we are doing already a lot of things but maybe it will be a good time for us to just check and look back our for whatever we have done and is that enough or if there's anything else that we can do.

Thank you Councilmember Soni and certainly related to some of the themes you've been addressing we will have in the fall I don't have the date in front of me but we will have a chance to review the Human Services budget recommendations from the Commission as well as have a joint session with our Human Services Commission so not at all covering all of the themes that you referenced in your remarks, but some of them we very much have a conversation planned for the fall.

Council Member Forsyth. Just a reminder that primary ballots are out now, there are several Supreme Court candidates up there are five, this is the first time in about 100 years that this has happened, so this is a very big. election year for our Supreme Court, we have reached the point where, if you are going to mail it you should you'd be better off using a dropbox so please use a dropbox to make sure that your vote gets counted. Wonderful.

Anything else? All right. With that, we are adjourned. Thank you so much. Good night, everyone. And thanks so much, Chip.