City Council - Regular Meeting

He's relaxed. He's got this damn Oh, he's had it ready for a long time.

Oh, I see a typo. We are live.

We are live. call this workshop to order and uh we'll start this off with our workshop with your budget from Mr. Bob Ford. Uh good afternoon, Bob Ford, chief financial officer. Um so tonight we're going to do a couple of things this afternoon. We're going to go through for about an hour go through the the budget, both the operating budget and the capital budget. Um, and then we'll uh go into the discussion on the the uh the cyst. Um, you should have all the information in front of you. Um, I printed out the PowerPoint that we're going to talk through. Um, Jake and I are going to tag team this. I'll do the operating side. He'll do the capital side, finish up with debt and debt uh debt service, and then we'll move right into CIS. So, with that said, um let's see if we're working here. Here we go. Um so, fiscal year 2026 is going to be a really big year for the city. I mean, the wastewater treatment plant will come online in the fall. Um we've got a new building that's going up next door and we'll be uh uh in that new building, we think sometime in December. Uh, so we'll have a full year in the in the new space next year. We've got a new ERP, new payroll HR solution coming up, new utility billing, um, and not to mention a new city administrator. So, a a big year for the city coming up. Um, and a and a big year from a budget perspective. So, let's spend a little time talking about uh the 26 budget. Uh specifically, I started out by just reminding you of the process we go through every year. Um we have really

streamlined the process over the last couple of years. We've gotten it down to where literally we can produce a budget in about two months. We really started the process on the 4th of August this year. Um it went even smoother this year than it did last and we were able to get the package out to you council and mayor. um back on the 6th of October to give you enough time to review before this before this session. So let's talk about highlights of the 26 budget. So from a consolidated operating surplus perspective, we're looking at a consolidated surplus of $6.4 million. So, I'll just walk you through the highlights. Then, we'll spend a little more time drilling a little deeper, and then we'll spend quite a bit more time drilling deeper on the revenue and expense side, and then Jake will pick it up and walk you through the capital side. But once again, operating surplus of about $6.4 million. And over 75% of that operating surplus for the first time is coming from the utility billing uh environment, specifically the water and the wastewater uh funds. And specifically, it's it's re a result of the rate increases that we put in place over the last couple of years and the timing of those cash balances starting to build before we start to in fact deploy the water fund and and and the uh the funds for the incremental wastewater side. um consolidated capital surplus, which Jake will spend quite a bit of time talking about, $691,000. Um we've got capital expenditures budgeted at $50 million for the year. And we're going to fund those uh $50 million of capex uh from cash off the individual funds balance sheets of about

$129 million. uh transfer from the cyst of two grants of an additional 1.2 2 million SRF debt specifically for the wastewater treatment plant will be another 30.5 million of the sources sales tax revenue specifically as you will recall we have sales tax revenue that funds our operating budget and also funds our capital budget on the capital side it's coming from uh fire is bringing in capital resources um through a sales tax uh revenue source uh parks has a has a a capital improvement sales tax specifically designated for capital investment as well as the citywide cyst. Um debt will um will go from about $77.8 $8 million at the beginning of 2026 on a projected ba basis and we'll end the year a little over hund00 million in debt specifically because we will have deployed all of the SRF money at that point in time. Um so um and with that um we'll also see our cash balance over the year start to deplete from end this year with about almost $17 million in cash and by the end of next year that cash balance will be down to about $10 million. So let's drill a little deeper on the operating side and on the capital side. So once again uh if you look on the left hand side of this page the operating budget is broken into two components revenues and expenses. And once again remember not all of the city uh sales taxes are captured on the operating side. Some are captured on as a source of funding on the capital side. So, city

sales taxes that fund operations about uh $10.9 million uh fees, licenses, rental uh income as well as program revenue another 4.4 million grants pretty uh dimminimous uh interest income etc. Um the important thing I want to point here is um the is that for the first time utility billing revenue is now above $10 million. We're going to be sitting at $15 million for the year. So for a total operating revenue budget of $40 million uh and and 407 million on the expense side, uh debt service $4.9 million coming up for this upcoming year. And once again, we're starting to uh deploy the SRF money at this point in time for the the residual period of 25 and 26. The SRF balance outstanding will only u we'll only have to pay interest until we get to 1127 and we fully deployed the plant. At that point, we will notify DNR that the plant is fully deployed. At that point, they will finalize an amortization schedule which will show both principal and interest being repaid beginning in 2027. So, we'll go from our projected um interest expense on SRF for this upcoming year is about $660,000. We'll go from that in in the form of debt service to something in the neighborhood of $2.3 million in 27. Uh departmental expenses are pretty dimminimous. Operating expenses you see here. Personnel continues to be our largest single item expense item. We've divided personnel expenses both in

direct and indirect uh perspective. And then we've also got transfer out which nets against transfers in and this is the money that the general fund provides to both f fire and to police as a revenue source to them but an expense to the general fund. On the capital side, once again, as I mentioned, we're going to spend we're proposing to spend about $50 million uh for next year, 41 uh million in capital uh projects, vehicles of 5.6, debt service of 519,000. Once again, this is the parks debt service because it's specifically designated. Those funds are specifically designated as capital funds. um departmental specific expenses and transfer out which is really the cyst transfer out of its bucket which is a source of funding on the other side for u the various funds once again sources as I mentioned 12.9 million in cash city sales taxes once again are fire parks and the uh the CIST debt advances specifically the SRF money interest income uh pretty dimminimous on the capital side miscellaneous revenue and the transfer in which is reflective of the monies coming from the CIS going to the various funding of the various um the various funds. Um but once again we we showed you an operating surplus of $6.4 million, a capital surplus about $691,000 for a consolidated net surplus forecast in 26 of $7.1 million. If we start to drill down a little deeper, let's start on the revenue side. Um, what we've done here is we've broken out the various revenue sources. Um, and if you'll I've identified them both

revenue sources for the operating budget as well as the capital budget. So, we're showing taxes uh both uh sales taxes, property taxes, and other taxes of $16.4 million. And then other other revenue, program revenue. So this is specifically uh admissions to the rush. Uh concession revenue, uh community development revenue, uh fees, uh those kind of things are flowing through that bucket. Utility building revenue 15.3 million. U sales tax, a miscellaneous revenue of a pretty dimminimous amount of 393. Once again, for a total operating revenue of about $ 36.5 million. On the capital side, we've got those three separate capital defined revenue sources from sales taxes. Park cyst of a little over a million dollars, fire sales tax 535, and the citywide cyst of a little over a million dollars. Also in in the on the top of the next page, what I've done is I've taken that revenue information and kind of ranked it from high to low. And once again, you can see utility billing for the first time is sort of our number one contributor to the revenue of the city. Uh for almost 40% of our revenue will be coming from the utility billing revenue. Sales taxes represent about 35%, program revenue about 11%, other taxes around eight, property taxes at six, etc. So for a total of of $39.1 million in total of revenue um for 2026.

So your utility billing, you say that for the first time that's our number one. Is that a good thing? It is a good thing because once again up until this point I'll use water the water fund as an example. The water fund um was barely a break even fund.

We could barely fund operations and we had no in money for capital investment. What we've done, as you know, last year we raised our rates. Um, and those rates are put in place so that over the next 15 to 20 years, we can build about $85 million in cash, equivalent equivalent cash over that period of time because we have an $85 million capital budget for water. So, this starts building that cash balance so that when we have a capital requirement for water or an additional capital requirement outside of the wastewater treatment plant, we've got the money to fund it as opposed to having to go into debt again.

So, I guess the question is is is for municipalities like our size, would you rather see the sales tax income better or the utility building or which would you rather see or does it matter? Well, I think it depends on where

where the investment is going to happen over the next 15 to 20 years. I think we've starved the investment specifically in the water fund over the last 15 to 20 years. We need to start investing that infrastructure. We started investing in the in the wastewater treatment plant and that infrastructure, but there's still other infrastructure related to that wastewater fund that still needs to be funded outside of the wastewater treatment plant over the next 20 years. And we'll spend some time talking about the capital improvement plan, which this year we've we've expanded from a five-year plan to a 10-year plan. So, we're starting to build a more strategic vision of the future and and look at those capital needs that are required over the next 10 years to say how are we going to pay for this?

Once again, this is a by raising the rates that we did um back in 23 for wastewater and in 24 for water. This starts to put in place a syncing fund, if you will, for future capital investment for these two proprietary funds. Thank you.

Let's drill down a little deeper and talk about city sales taxes. Um on this page, um we've broken out sales taxes and giving given you some historical information going back to 22 through 26. Now once again the purpose of this of this data really and this chart is to show that really for the last three years city sales taxes have been pretty flat. Um if you look at um the growth rate between um 22 and 23, we had about a 1.1% growth rate um with and without the marijuana tax, which didn't go into effect. But if you at at that point in time, but if you look at 23 to 24, we had a pretty significant growth in that period of time growth of 3.7% year-over-year. But 1% of that growth was in fact the fact that we implemented a marijuana tax and that was a new tax. So if you backed out the marijuana tax, we actually saw growth in that year of 2.7%. If you look 24 to 25, um, what we have budgeted is we really have budgeted zero growth for the year and it's we're about on par to achieve zero growth in 25 as compared to 24 based on the budget. If you backed out marijuana, it's actually it's actually negative growth for this year. And so given that, we have taken a very conservative stance in terms of the growth rate for forecasted fiscal 2026. And we're assuming no growth except for the growth in the marijuana sales tax operating budget. Um,

and expanding on the utility billing revenue. Um, this is pretty this is pretty illustrative of what we would have expected to have seen. If you go back to 22, our revenue in total for the two proprietary funds was sitting at $6.2 million. By the by the end of 26, we'll have seen that number more than double. Once again, we've seen specifically on the water side, pretty significant increases in rates. Specifically, as we we mentioned, Dan, to really build that sinking fund so that when the next water tower comes up or the next infrastructure for a new development comes up, we've got the cash to pay for it instead of having to go back into debt. Um the same thing on the wastewater treatment of the wastewater fund. Um we've seen fairly significant um rate increases year-over-year. Not as significant obviously as the water fund, but once again those monies are specifically in place and those rates were done to support the debt service that we currently have and will have. one, we've got the series 22 debt and with the SRF money coming online, the debt service specifically to the wastewater treatment plant, round numbers, the series 22 debt service is about $3 million a year. SRF is going to add another $2.3 million to that number. So, we'll be sending a little over $5 million in incremental debt service in the year 2027 where the wastewater treatment plant the only way we could fund that was to borrow the money.

Um I I think on this one I I just the importance is to highlight the fact that the rate increases will finally start to do what we need them to do and that is to build cash for water and to provide cash to service the debt for wastewater. If we move on to the expense side on the operating in the operating budget, we'll talk a little bit about um the kind of the big buckets. Personnel expenses um as we mentioned are our biggest line item. Personnel expenses represent almost 60% of our total expense as a percentage of our total expenses. Um base salaries for fiscal 2026 um are we've built in a cost of living and a as well as a merit increase for the year. Cost of living at 3% and a merit increase on average at 2% for a 5% increase yearover-year on the on the compensation on the base salary side. health care. Uh the city as you know has always funded or for the last number of years has funded 100% of the employee costs but in 24 we made the decision to pick up 50% of the dependent health care costs also. So we had and we'll see some of these numbers in in a moment. Um, and in addition for fiscal 26, we're going to see across the board about a 10% increase in our healthcare costs. Um, which is actually much better than what they originally quoted us. And it's it's actually right about the in the the industry average. What we're seeing across the United States is about a 10% increase.

retirement benefits. As you recall, we upgraded um our defined uh pension plan from um L3 to L6 back in 25. Um and we maintain our 457 plan, but historically in our 457 plan, the city just contributed without requiring a contribution from the employee. Now we require a contribution from the employee and we will match up to um 100% of that that deferred amount up to 4%. So in a nutshell uh personnel expenses represent 56.2% operating expenses 25% departmental expenses are predominous at 2.4 debt service is sitting at 16.1%. If you were to take those numbers and layer in the debt service that we're going to see in 27, the debt service is going to go to 22% of our total operating expenses. Which is why it's important that we put rates in place to build syncing funds and to build cash so that we don't have to continue to borrow money to fund the city to fund our capital investment in the city. On the next page, we'll talk a little bit about we'll drill a little little deeper on the compensation and benefit side. I've given you four years of information here, two years of actuals, what we currently have budgeted for 25 and what we're proposing for 26. Um, couple things I'll highlight. If you look at in the year uh 2024, healthc care health health care went from 868,000 in 23 to a little over a million dollars in 24. That's driven one by more people being employed by the city. to the cost of health care going up, but primarily

the city picking up half of the dependent health care costs as opposed to in in the prior years the employee paid 100% of that. Um look at retirement. Um if you look at 25, you'll see an increase from um where retirement was about 13.8% of the total compensation and benefits summary. Now it's in in 25 it went to 15.2%. Once again we went from an L3 to an L6 plan and in that environment we see the increase year-over-year. The additional thing to look at is that in the salaries, temporary, seasonal, and part-time, if you look at 2026, what's currently projected in the proposed budget, you'll see that that number continues to climb, and it's really reflective of a couple of things. One, we just have more seasonal employees, specifically for parks. We need more people to run the rush. The rush is bigger. We've got more going on. We've got more seasonal employees. and the cost to employ those seasonal employees on a per head basis have has gone up over time. Once again, staying with employees, staffing, etc., etc., This is just a chart to show how the city has grown over the last um four or five years. Looking at where we began in 22 and where we're proposing to end 26. U we've gone from beginning employees at the beginning of 2022 ofund 139 and we're going to end up at 160 161 162 employees. Um once again at the bottom of the page if you look at health care

you can see that health care in in the change from 23 to 24 health care per employee went up 21.4%. once again tied to the fact that the city picked up half of the dependent uh care cost at that point in time as well as we're seeing more employees and we are seeing a situation where the cost per employee is just going up. Same on the retirement side. You see once again the amended budget that we showed that for 25 we saw an increase in the average cost per employee on retirement. It went up 24 to 25 by 12.4%. Once again, L3 to L6. So that takes us to the end of the sort of the overview of the operating budget. Um once again um it this operating budget generates a positive uh operating earnings of about 6.4 4 million U which is significantly bigger than last year. But once again that is being driven primarily by utility billing rate increases and that those rate increases are specifically driving th that cash will be put into a syncing fund for future capital investment. So any questions on the operating budget before we get to the capital side? Um, and we'll also take a little short break here so you can grab something to eat and then we'll assuming it's here. Um,

it's going to make you really popular. Yeah, I know. So, questions on operation operating budget. Yeah, just not the this more for for HR, but um from our perspective, did the increase in the health care and the dependent healthcare has that increased our retention rate? Was that a benefit? Is that a positive?

It's a huge positive. In fact, we got the preliminary results this morning from the wage analysis and we are the regional leader in healthcare. So, um, and our benefit side, which includes the healthcare. So, it's been a huge win for us um because we are falling behind on salaries a little bit um that we're going to have to work on. But looking at the total compensation package and seeing what we're doing for the benefit side of things, we are we're whole. We're we're very competitive.

And and does that increase our retention or does it decrease that? I mean, are people saying, "Hey, I love this. I'm gonna stay here for longer." Or Yes. I mean, it's it's hard to look at retention because we're going to end the year at a high turnover rate. Um, but the turnover, that's not necessarily a bad thing, but the overwhelmingly I can tell you that it is near and dear to employees hearts the benefits that we offer. And in fact, recently we just hired an employee and I don't sit in on interviews anymore, but I sat in on these and that is the reason they wanted to even apply here. Very good.

So, okay. Thank you. What is the turnover rate by any chance? Do you know off top of your head? I don't have that number with me right now, but the last time we ran it, which is about a month ago, we were running at about 13%. I'm anticipating to end the year at 15 to 17%.

Other questions on the operating budget. Is food here? No. Okay. Well, sorry, Jake. No food. You're going to have to do this hungry.

I'll go fast so we can jump right to it. Capital is the fun stuff. Anyway, so Jake Jones, finance manager. Uh Dan, I'm going to start I'm going to address the question you asked a little bit just to add a little bit to it. One thing I think it's important to note when you're comparing utility billing revenue and sales tax revenue is they don't cross over. So the utility rates have to be what they are to fund those operations. So they're really separate from sales tax altogether because we can't use sales tax to fund the utilities and we can't use the utility revenue to fund the rest of the city. So one being higher than the other. It's just a product of what we need to run those utilities. So I just wanted to add that. Um the clarification.

Yeah, absolutely. Um so now we'll jump into capital expenditures. This is this is the more fun part of the presentation. At least I think so. Um so I won't go over the totals. Bob kind of covered that in his overview, but we'll start to drill down a little bit specifically on some of these projects. Um, so general fund is usually pretty minimal. A lot of times it's just spending money for other funds. So general fund is going to contribute a little bit to the J.R. Martin project. Um, and that's going to be the big uh capital focus for the parks and recreation fund um for next year. Obviously, if you've driven by there, they've already got fencing up and construction is underway. So the number we've got plugged in there is our anticipated number for what we'll spend next year. Granted, we're going to spend some this year. So that number could get adjusted in a future budget amendment just depending on where the where we end this year at versus where we're going to start next year at. Jumping down to police, um biggest expenditures for police is always going to be their vehicles and equipment. Um, a thing we're doing next year, um, the last few years through the cyst tax, we've, uh, been able to purchase three vehicles a year for them. Next year, we're actually doubling it. We're going to get six. And what that's going to do for the police department is it's going to get to where every officer has their own, which will do a couple things. Um, it's going to, for one, if some of those cars that are on the road 24/7, they're accumulating miles a lot faster. So, we got to replace them faster. So, getting this six in one year to will slow down that curve. And then I won't steal Bob's center for later with the cyst tax. We'll talk about future plans for that. But this will be a good start. And then, you know, Chief Cells and I ran the numbers and really the number we need to be at to to stay on top of the fleet is probably closer to like five a year. Um, but this six for next year will put us in a good spot. Next is the fire fund. Um, biggest expenditure there for next year. The ladder truck is, you know, knock on wood. Hopefully it's Oh, he left. Dwayne's not even here. Hopefully will be delivered by the end of the year next year. Um, if you want to hear a long

Saab story, you can hear um Dwayne talk about the the market for fire trucks because there's a lot of weird stuff going on there. Basically, prices are going up, lead times are long. So, we're hoping that we'll get that by the end of next year. It was originally supposed to actually be December of this year, but it's got pushed out an entire year. Um, next we'll move into the builds fund. So, water first AMI. So, that line item shows up in both water and wastewater. Um, so what AMI is, it's a specific module that goes onto our water meters that allows us to read them remotely. So it's actually cellular technology. What that's going to do is it's going to put the information in our utility billing hands, our meter readers, and our customers a lot faster. So that way, you know, leak detection, things like that, abnormal usage, we'll be able to spot that a lot sooner than um we do now with people driving around with radio reads and manual. So that'll be a big project. We're anticipating to get most of it done next year, but there's a chance it'll it'll bleed over into 2027. Um, next on water list, um, we've got some water tower, um, SCADA is the software they use to kind of control all of the the reads and where the water's flowing from the towers and wells and what flows back into the treatment plant. So, you see the SCADA line item on both water and wastewater. It's it's connected. Um the rest wastewater we've we've all talked about the wastewater treatment plant at Nauseium. So um this will be the last big push. It'll go live in 2026. So this is the last time we'll see a big amount for that treatment plant. And in a slide later on we'll we'll kind of break down those costs over the years and how they've kind of flowed. Um moving into streets. Um biggest one I'll highlight here is a street overlays. I know you guys are all familiar with our street overlay program. We've added to it for next year. That's going to allow us to hopefully hit more streets um next year, but Karen's team will obviously be in charge of who gets those and you'll see that later later next year whenever it's

it's time for that. Um and then the cyst tax, um kind of like Bob mentioned earlier, um it's a specific tax for capital improvement projects and what it does is it sends money to the other funds to pay for their capital projects. Um so I wrote down a couple notes. the transfer to street that has to do with storm water and the Hines and ZD roundabout engineering that'll happen next year. Parks is for J.R. Martin. Police is for the vehicles that we talked about. And the general fund is also for fleet vehicles, um facility maintenance trucks and community development trucks. So we'll move on to the next slide. So same thing here. This is this is the same information just viewed a little bit differently. So funds across the top, categories down across the left. The only thing I'm going to mention here is um Bob already hit on it a little bit, but we do have a capital surplus in two funds. And I'll just reiterate the fact that that happens because those two funds have specific revenue sources that are capital only. And in the case of 2026, those outweigh what we're actually going to spend in those funds, thereby the surplus. Everywhere else, we're using existing cash or other funding sources that um sources equal uses everywhere except for those two funds. Next, Bob also mentioned that our CIP plan went from five years to 10 years. So, first thing I'll talk about is just a clarification. That number for fiscal year 2026 to 50,38,5 that number does not match the 2026 number on the CIP. And the reason is is we basically just backed out the debt service that he already mentioned and those transfers. So whenever you're looking at the 2026 CIP document, which we'll get to it later, that is actual dollars that will be deployed for capital projects. The debt service and transfers, that is that are dollars that we'll spend, but they're a little bit classified differently. So that that's

why there's a difference. Um, but overall, the 10-year CIP plan, obviously, the goal there is to put some of these on a list to start planning for. So that way, you know, we can start to figure out how we're going to fund it. In certain cases, there's departments that control their operations. You know, parks is a good example. If they know that in 2030, they've got to spend x amount of dollars for a certain project, what can they be doing now in their operations to help build that cash surplus to pay for it, so that way we're not always going into debt every anytime something comes up. Um, also a couple highlights we'll talk about on the top right. Again, we'll talk about them whenever we get to the CIP document. Um but main ones I wanted to talk about um water towers. Um so we talked a little bit in Bob's presentation about you know the utility billing revenue is going up and what are we going to do with that? A lot of it is building cash for future projects that you can see in the CIP. So I'll I'll quickly move through these next few slides. Um this is the highlight for the water water fund specifically. Um so we've got two water towers that are planned. The first one out by Convoy of Hope. We do have a $5 million congressional earmark is going to pay for that, but the rest of it is going to be residual cash that's been built up through the water rate increases. Um, planning, we got a little bit in the CIP for engineering for 2026 with construction starting 2028 and and those take a while. Um, and depending on timelines, these are always fluid, but that's that's what our current plan is. And then the second water water tower, the Frisco water tower, that is actually out by our PD building on the other side of town. Um this one $15 million water towers are expensive and again that's that's residual cash built up from the rate increases and a little bit shifted timeline on that one. Engineering starting 2027 construction also following following that. This slide hits on our wastewater treatment plant project. I know everybody has probably seen these numbers but it's good to kind of break

down what years the money got spent and how it was funded. And with that go live date in 2026. Um this will be the last year we have these big projects on here specifically for the treatment plant. Um but just highlighting you know we've got a total of 140 million there and then how the breakdown there on the funding. So that SRF debt is what Bob talked about. That's going to be the last stretch that gets us through. Um and then that'll show up next year debt service wise whenever we're on the hook for the interest and principal payments. Next slide is just a a little bit of information on how the street capital projects get funded. Um they don't necessarily have a a dedicated capital sales tax themselves, but they do have their own transportation sales tax and property taxes that help pay for it. Currently with the CIS, some money is allocated, like I mentioned earlier, that goes to them, plus there's grants and developer agreements that will come in and fund some of these projects as well. Last slide is just pointing us to the CIP. So that's the bigger document that's in front of you. Um, so if you have any questions specifically on any of the numbers we have seen already on what that actually means, we've got it broken down in this document. So the first page um that's just on the top there, that's the same summary that was on the first slide whenever we were talking about the 10-year CIP. But if you flip over um it's fund by fund. So the first one, this total, the 279 for 2026, that's the same number we saw earlier, but this is the actual list of projects that make up that number. So there's the the trucks that I mentioned that are that are getting paid for by the cyst fund, and there's other miscellaneous things that um have to do with building upgrades that are along in the general fund. Moving on to the next one, um I I'll highlight Parks and Wreck. They've they've got the biggest CIP of all of all the funds. That's because Chris and his team did a great

job of getting in here and really starting to plan for the future. So, couple ones I'll talk about. Obviously, we've already talked about the loop at JR Martin. That's going to be their big one for next year, but you can see this long list of things that span out over the 10 years that um at least for our current plan, that's that's what they're anticipating spending. And and every year that we go through this this process, we'll get a little bit more information. So 2027 will be the basis for next year's CIP and we'll at tack a year on the end, but we'll always be evaluating this time period. Um, so it's it's it's good planning so we don't get caught flatfooted whenever it's time for these projects to come up. Next page is the spillover from from from parks and then we get into police and fire. And I'll I'll be pretty brief on these because it'll come up in the cyst conversation later, but mainly it's it's equipment. So, it's the police cars we already talked about. On the fire side, it's the ladder truck we talked about, plus starting to plan for potential fire station 3. Then moving forward to the builds funds, um, water and wastewater. We had those slides that talked about these briefly, but these are a little bit more detailed. Um, one of the big ones is CIP9. If you've heard about CIP9 before, it's a total project estimated to be about $50 million. And on our current plan, we have it scheduled for around 2031. This is a pretty massive upgrade as far as like the water and sewer lines and and how our entire system works. So, that's a that's a big one and um that will come up at some point, but it's like I said, it's it's already on our plan. We're already starting to plan for it along with the water towers and the AMI upgrades. All of that it is in here and the numbers match what we've already seen before. Um street fund, we've got highway MM in here. you know, some of that has has a lot to depend on state funding and how that all works out. But another one I'll highlight the overlays that we already talked about. We've got those amounts every year for our CIP

because we'll always be doing that um throughout. Um but other than that, um you can see the entire list of projects and what they make up. So if there's any specific questions on any of them, happy to answer them now or uh the next time we meet. But that is all I have for capital. So, if anybody has any specific questions, be happy to answer them. Yeah. Um, so we talked about, you know, saving for future expenses on the wastewater, you know, down there on on the street funds. I don't, I guess, do we not foresee as much of that? I mean, I see we see the 750 going forward, but know we've been playing catchup over past, you know, probably a little bit neglect of of roads. I was just kind of curious if we're looking at anything like that similar on the on the street fund side.

Yeah, it's it's similar. Sure. Um, basically any residual cash that we have every year in the street fund ends up going to overlays. So, a lot of that depends on the operating results. Um, but it is a project, but a lot of what Karen's team does with new roads and such, there's a lot of partnerships with developers that end up paying for that. So, there's a lot more cost sharing available in the street fund, whereas the water wastewater, it's all on us. But yes, to your point, um, that's why you see the number has gone up and it'll continue to go up hopefully as sales tax. Hopefully, we can see that rebound a little bit. Um, but realistically, a lot of the any residual cash on the operating side for the street fund, that's where it's going. Yeah. The only income source is the sales tax for it. Correct.

Sales tax, property tax, any grants, other things, but it's mostly the sales tax. Correct. Yep. Thank you. Any other questions? Thought that was it. All right. Hopefully hopefully food's here now. It is. Okay. Food's here. Let let me finish the last two slides and then we'll take a break and then we'll go into the grab grab dinner and then we'll go into the cyst discussion. Perfect.

So once again we've talked a lot about debt and this is the debt summary showing uh where we are projected to be 123125 and then the advances specifically the SRF advances and then where we'll end the year. So, you'll recall from the highlight page that we talked about when we first started, we're we're going to start the year next year or end this year of 25 at $77.8 million of principal outstanding on the debt side and we'll end next year at a little over hund00 million of debt outstanding. Um, debt service calculation is right next to it showing that we're going um that debt service next year is at 5.3 million 5.4 $4 million in total. Some of that is funded from capital revenue, some of that is funded from operating revenue. Um just recall our discussion there is the debt service for this coming year for 26 specifically on the SRF is interest only. We will see principal come into play in 2027. And so we'll see that number go from about $660,000 th this coming year to a little over $2.3 million in 2027. And last but not least is the debt service schedule 26 and beyond. um which basically shows that we have $146 million of debt service over the next um 20 years specifically around these projects as we've outlined them. Um and we'll talk a bit more um when we get to the cyst how potentially there may be some additional debt that may need to come online um down the road. Um, but this is just to keep us all calibrated as to where we are from a debt service

perspective and what it looks like from now through 203. So questions on anything uh operating capital um debt debt service happy to answer anything you should I know that in the package that we sent out on the 6th of October you have a detailed fund by fund line by line operating and capital budget laid out. So you in addition to the information we provided on the CIP by fund and by line item, you'll also have that detail in the operating capital budget information we sent out in the in the prior uh submission we did on the 6th of October.

The SRF debt super low interest rate, right? 126. And then what was the annization? Was it I can't remember what 22 years. 22 years. Okay. And we have the ability to accelerate it, but probably wouldn't because it's so low. Yeah. Um really we could accelerate at any point in time at going to DNR and asking them that we'd like to pay it off early. Um however, there is um uh I think it's 2031 or 2032 we can start paying it down. I mean I'd rather pay off the 2022 debt before I paid off the SRF money.

Yeah. Great. Yeah. Okay, thank you very much. Grab some dinner and then we'll talk about the cyst. Thank you, Mr. Jones, and thank you, Mr. Ford. We'll take a short break.

Well, good evening again. Well, we're going to talk a little bit about the capital improvement sales tax. Um, and specifically, I'll give you the punchline. and it we're going to discuss um a renewal and a repurpose of the capital improvement sales tax from a city-wide CIST to a public safety CIST. So, um just to give you a little background, you know, what is the cyst? It's a quarter cent improvement sales tax was renewed in October of 2017 for a period of 10 years and it will sunset uh September 30th of 2027. At the time when it was renewed, was it a new tax? No, it wasn't. It replaced a quarter cent storm water capital improvement sales tax. So, it was a a just a a trade or a repurpose of that t at that time from storm water to a citywide CIST. Um it's a quarter cent. So for 2025, we're going to generate just a little over a million dollars of revenue out of the cyst. And we we showed you quite a bit of of data around how we're going to deploy that uh that capital um in 2026 and beyond. Um and the purpose of the cyst is to fund infrastructure and departmental capital improvement projects citywide. So back in 2017, I wasn't here, but um in going back and looking at the data, uh we identified a number of projects that the cyst would in fact uh potentially fund. It didn't mean that we were going to fund all of these and there were dollar amounts that were floated, but the idea was these are some projects that we'll look at funding out of the cyst. an ADA transition plan, the animal shelter, digital radios, downtown revitalization fleet, vehicles, etc., etc. So, where

where are we? I tried to give you a bit of a maybe kind of a dashboard of where we are on the ADA transition plan. Um, that's primarily going to be grant funded, but those dollars that we have committed from the cyst have been spent. Animal shelter, as you know, we built a animal shelter. It costs more than we thought it was going to, but we funded it out of the cyst. Digital radios, downtown revitalization. We've done some work on downtown revitalization. Um, at the same time, um, the city has done quite a bit towards, you know, for instance, our contribution um to the historical society of the land so they can build a building would go toward that downtown revitalization project. um fleet vehicles, the gateway sign, all the things you can see here. Um in terms of have we accomplished what we generically set out to do, and the answer is yes. Um storm water projects, we have some money set aside in the 2026 budget. And then below that line are projects that were not originally contemplated, but that we were able to generate enough sales tax revenue to pay for the Sawyer land purchase or part of the Sawyer land purchase for parks and rack. Additional police cars have been set aside for next year. as Jake mentioned to you earlier, um part of the J.R. Martin uh park project upgrade um are it's coming from money set aside half a million dollars from the cyst going toward J.R. Martin as well as East Hines. We've got money set aside for that. Also, the next page is pretty umformational. that shows you total sources and total uses of the cyst since its inception back in 2017. So in 2018, we showed the monies coming in, how we've spent those

monies. So a little almost $10 million over this period of time have has either come in or is projected to come in um either in this budget year or the remaining two years. And then we've outlined the uses by year of how the money has been spent. But the real the real um I think the real important thing here is that as part of the capital improvement um plan that we've been discussing tonight, that 10-year view, um after reviewing the city's 10-year uh capital improvement plan, there really are two critical city departments funding needs that stood out to us as a priority. um one is the fire fund and the other is the police fund. Um so if you think about public safety funding from an operational perspective in 2022 the citizens of republic passed a quarter cent public safety sales tax to fund public safety operating expenses. specifically additional personnel, improved salaries and wages for existing and future personnel, as well as improved benefits for existing and future personnel. The public safety sales tax, as it's currently configured, is split 5050 between the fire department and the police department. Um, in 2025, the PSST is budgeted to generate about $3.2 million in total. Half of that's going to police, half of that's going to fire. However, that revenue is not

sufficient to fund all of public safety's operating needs. Um, the police budget for that we just went through and project and and showed you for next year is $4.2 million and the fire operating budget is about $4 million for a total of $8.2 million. Therefore, the general fund and Green County um provide an additional $4.7 million to public safety to complete the funding for public safety's operating budget. So, the general fund in 26 will contribute $1.7 million to the the police department or the police fund actually in 25. These are our budgeted numbers and $2.3 million to fire in 25. In addition to that, Green County through the law enforcement sales tax will contribute $713,000 to the to the police fund in 25 so that we can complete the funding of the operations of those two truly important departments of the city. However, the public safety sales tax does not fund or provide funding for any of the capital needs for police or for fire. So with that backdrop, one of the things that we've been talking about internally is repurposing the sales tax revenue currently u set aside either as uh CIST revenue and also FIRE currently has an eighth of a cent set aside for capital. So what I've laid out here for you is the current cyst of a quarter cent

the fire sales tax of an eth. So for a total let's just look at the 25 data. The total for those two combined numbers would be $1.6 million or 38 of a cent. What we are proposing or what we would like to talk about and discuss with you is repurposing the cyst as well as the fire sales tax and renew those simultaneously at the same time renew those two taxes. So it's a no tax increase and that 38 would be dedicated for the next 25 years to public safety. So what I've done is I've laid out what the new cyst what we're calling the new cyst which is 38 of a cent uh what it would look like and then I split it 35% 65% from police and fire. So, this this is just the math of of how we get police with um in 2028 $577,000 to fund primarily police cars and a little over a million dollars to the fire department. That sort of sets the stage and the idea here is to take the citywide cyst and repurpose it to public safety. Um, obviously in the scenario that we talked about earlier, the police department has already laid out a 10-year capital plan that it that it envisions that it needs primarily vehicles, but other capital needs for the police department and the same for fire. Um, and so this is just another chart to give you another perspective. Um, showing in 26 what police will get that we just walked

you through as part of the budget process. $577,500. That's coming from the existing CIS and it'll go to fund six police cars and other capital needs for the police department. Um the sales tax revenue for FIRE in 2026 is specifically their 1/8 sales tax specifically capital related and that that money is they've been building that capital over time. They've got we'll have about $2 million in cash generated from that 18 cent sales tax. Um, but we're going to spend $1,964,000 in 2026, specifically primarily a ladder truck, which show and what we've shown here is a funding gap and what the cumulative gap would look like. Um, if in fact, um, we didn't have any additional funding sources. Um, and so let's walk through the left hand side, the police starting in 2028. If in fact we repurpose this public safety sales tax and this 38 of a cent if police were to receive 35% of that their sales tax revenue in 2028 would be 577,485. Their capital needs that we've already identified in the capital improvement plan that we just went through for that year is $616,000. So their need is actually greater than what we are proposing here. So one police would have to live within the context of their budget but this would basically double the amount that they have historically received from the cyst to be able to fund their investment in their vehicles. Um you can see the same

thing um on the fire side. Today fire gets 1/8 of a cent. That 1/8 of a cent is specifically capital related and what fire has been doing over the last three or four years saving that money in in plans of buying this ladder truck for $1.9 million. But at but at an eighth of a cent you're basically generating about a half a million dollars a year. Um, and you'll see here in a moment, and we've already looked at it as part of the capital improvement plan, the 10-year plan that's been laid out by FIRE, they need $20 million to accomplish their objectives over the next 10 over the next 10 years. That's both vehicles and and uh housing, fire, fire station. So, I'm gonna I'm going to hone in on FIRE for a little while. Um, so today FIRE has a restricted cash account specifically identified for capital expenditures and that money sits on its balance sheet and that money is that 1/8 of a cent fire sales tax. It's capital only and that's how we're going to pay for the the new fire truck. The the issue is if you if you go to and once again I'm just trying to set the stage tonight to give you an idea of a way to fund a capital investment plan for public safety that's been identified by the public safety teams and in a month from now Chief Cells and Chief Compton will come back and they will give you more definitive information about what their needs are over the next 10 years and specifically you're going going to hear vehicles from the the

police department and you're going to hear a fire station and more and more expensive trucks from um from the uh from the fire chief. But anyway, that being said, I wanted and this I'm I'm kind of in the weeds here, so you're gonna you're going to have to hang in with me. Um but I wanted to give you a perspective of where fire is from a cash perspective. So, um, the beginning cash for fire at the beginning of 2025 on a restricted cash basis, they had $2.5 million of restricted capital sitting in their on their balance sheet. And for the remaining, what that's actually as of the end of October, for the remaining part of the this year, they'll generate another $128,000 of sales tax revenue. Um but they need to buy a water tender. Um the one we have is is not safe. It's not it doesn't serve the needs of the fire department. And so we are going to buy a buy a water tender in the next couple of weeks. And that we're going to pull $385,000 out of that capital imp out of that fire sales tax bucket to fund it. So after we buy the water tender, they're going to have $2.2 million. We're going to set aside. We're going to designate that 300,000 of that is a reserve that they need to maintain going forward. That's going to leave them with $1.9 million at the beginning of next year. $1.9 million. We talked about their capital needs for 2026. They're going to spend $1.964 million in 2026, but in 26 they're also going to generate another year's worth of 18 of a cent sales tax revenue. So at

the end of next year, they will have a new firet truck and they'll still have $473,000 in the bank. This is important because the next chart is going to be meaningful. You need to kind of hang with me here. So at the end of 26, they'll have 473 in the bank and their capital expenditures identified in the CIP that we just went through for 27 is only $59,000. They're going to generate another $540,000 of sales tax revenue from that 18 cent sales tax. And so at the end of this period of time, at the end of of um 2027, they're going to have $955,000 in cash and a brand new ladder truck. Now, why does that matter? Well, it matters when you look at the capital needs of the fire department over the next 10 years. how much money they're going to have to begin with and how much money they have to fund um any capital investment going forward. So once again, I know we're kind of in the weeds here a little bit, but it's important to understand and kind of set the context with regards to fire and fire's needs and specifically in the capital improvement sales u plan, capital improvement plan that we've identified for the next 10 years over the next couple of years. We know that fire is going to need for a new fire station, which we own the land next door. That new fire station, round numbers, windage and elevation, about $9 million to build that fire station. And

we need two additional fire trucks to go along with that and to replace some existing rolling stock. And as a result, there's another $3 million. So, we really need $12 million to f to accomplish part of the capital improvement plan that's been identified by the fire department over the next few years. And beyond that, they have an additional need. I've already told you that their 10-year capital improvement plan said, "We need 20 million bucks. There's 12 of it. We're going to need another eight somewhere down the road." The only way e even if we were to do what what I've described here and we were to combine the two sales taxes the fire sales tax and the existing cyst put them together go to the voters renew that and police were were to get 35% of that fire were to get 65% of that fire's cash flow on an annual basis its revenue on an annual basis would double. It would go from about $500,000 today for capital to a million dollars for capital. But how long it would it take them to save enough money to build a new fire station, 12 million bucks new rolling in rolling stock and then an additional eight a couple of years after that. As a result, this you'll recall that in our discussion on on debt, one way we get there is we borrow the money. We borrow the money to accomplish an expansion of the capital investment that we need for the fire department and specifically to build the new fire station and to put more fire trucks in place. And in doing that, you sort of back into the numbers, if you will. If

they have about a million dollars a year from the proposed change of the cyst, then how much debt can they support? And so what this what this plan shows you is that it starts out with the sales tax revenue starting in 28, which is their 65% of the proposed 38 cents. And it should so they've got a million dollars coming in per year. round numbers. The 10-year CIP shows that um in 28 they need $12.1 million. So, we're going to borrow $12 million. The debt service on that is $1.1 million. That that means the annual funding gap if I look at total revenue in plus debt issued i.e. cash in the door less the CIP plus the debt service, I'm in the whole $127,000. Oh, but remember we started that year with almost a million dollar in cash. So, if you look at that last column, that last column is taking where we're starting with cash and it's starting to deplete that cash over time. So what this analysis does is it looks at total sales tax revenue in it looks at the 10-year CIP that's been identified by the fire department and in that in order to accomplish their needs and given the cash that we have we borrow $12 million in 28 we'd borrow another $8 million 32. This is the debt service and it shows that over this period of time we would have sufficient capital to be able to accomplish their need specifically around additional capital investment. I say all of this to say make one point

without the cyst being repurposed there is no way to fund public safety's capital needs. The current public safety sales tax only funds their operating needs. And the only way that we can build an additional fire station is to either save the money for the next 20 years. And I Dwayne's going to come and say I need it before the end of 20 years. So if that's the case, we'll need to borrow the money. And if we're going to borrow the money, then how much can we borrow given the kind of revenue that we would have in place to make the debt service? their current 1/8 cent is not enough to accomplish the plan. That's really all I wanted to say about the cyst. I I I think it it it provides a mechanism to allow us to make an investment both on the police side and the fire side over the next 10 years to put them in a much better position from a capital investment perspective. specifically the equipment they need to do their job in order to accomplish the objectives of the city over the next 10 years. Dwayne has got all kinds of data as to why that's the right location and it's ISO ratings and call times and all the things that explain why a new fire station is needed. It's needed soon and it's needed next door. He'll provide that information to you. But this is how he would fund it. If you think that's a good idea, this is one way to fund it and it's probably the best way to fund it. Questions? And once again, this is a discussion tonight. It's just here's an idea. Um, but I once again it it repurposing the

cyst to focus on public safety I think makes a ton of sense. We have any questions for Mr. Ford. So, we've got station three planned out, ready to go, and I'm already seeing station four. Is that just

station four? Is station four is in the 10-year capital plan. Now, we keep telling Dwayne, "Push that out. Push that out." It may end up staying in the plan because there will come a day when we'll need it. Will we need it exactly in the year in which we've identified it? Maybe not. But once again, we're pretty comfortable around the numbers that are going to be required over the next couple of years. We may find that that $8 million that we have is the second tranch of money that we would borrow in 32, maybe we don't borrowed until 36. Maybe we don't need to to do it until 37, but we do know that station three and the rolling stock that goes along with that is a pretty definitive objective for the fire department over the next couple of years.

Do we have any other questions, comments? May so the it matures in 2027 and but the proposal I know we're just now talking about it would be to renew it earlier and for a 20-year period 25 25 25 to match the amortization of the I I looked at an amortization of $12 million over 20 years and it's just we just can't generate enough revenue to make that debt service payment. So you touched on a little bit. In the past, this has been used for what? It's been used kind of across the board. Um, if you go back that was that was what this was, right? Yeah. Yeah. Okay. Yeah.

Um, you know, if you look at of the $9.8 million that we generated over the last 10 years, um, really the biggest expense has been it has gone to fleet vehicles primarily to to fire, I mean to police. Um but the second largest thing beyond the East Hines 1.8 million is the Sawyer land uh acquisition which we did. Um which was really an unplanned activity. We just had the revenue we generated more cyst revenue than we had originally expected and it we were so much serendipitous that we had the cash and the price was right. We bought the land. Right.

So I guess my point is that the things we identified pre on the previous ballot most of those were taken care of all are some sort and so we're not taking away from a you know reoccurring need. No we are not.

Yeah. And once again, a number of the of the activities, um, you know, for instance, we're comfortable that with the rate increases, and as Jake said, you can't mix sales tax revenue and utility billing revenue, but we're comfortable that with the utility rate increases that we're putting in place, that we can we can keep our proprietary funds and their necessary investment, we can keep those funded over the next 20 years. It's a it's the other funds, the other governmental funds that we have to look at. Parks and Wreck, remember, they have their own capital improvement sales tax number. They get a quarter cent a year that goes to capital. Currently, it's funding the debt service on the series 23 debt as well as some incremental capital. It we're going to use part of that that residual money, if you will, to help fund the J.R. Martin expansion. But once again, parks is set. they've got their own capital improvement sales tax number. This would this would solidify public safety.

And so then just sorry just further clarify. So 25 year going from a fourth to 38 going from actually it's combining a quarter and an eighth because we're we're going to we're going to renew the fire sales tax the capital sales tax at the same time. We're going to roll them together. So we're going from 38 to 38. So yeah. So no no net increase to the public increasing the time. Correct. Okay.

And then does it handicap us at all of say we get into year five and we decide not to do one of the larger project is funding those funds then are they are we stuck with using those for those departments or how how does that work I guess? Well so if we in fact redefine repurpose these two specific capital sales tax amounts and we identify them as public safety. It needs to stay in public safety. Um so we could go a wide range of things within we could do a we could do a variety of things so long as it's within in the public safety realm. Yeah. Okay. So the chief says you hey we don't need the fire we don't need the fire department an extra building now but we need a truck. As long as it's in that.

Absolutely. Yeah. We would we would write the ballot language to give us enough flexibility to be able to put those dollars. If we just said 65% of the 38 is going to fire, it's capital related. Whether it's a fire truck, a water tender, um it's it's infrastructure investment in the new firehouse. It doesn't really matter. It's a capital investment. Thank you.

How do we come with the 6535 split? Um, well, it was one of those where we identified the amount of money that they needed in the near term, $12 million, and we kind of backed into I backed into what does the debt service look like on $12 million over 25 years? What do I need about a million dollars? Any other questions, comments? And did you you said that the the later date the chiefs will come and kind of talk more into detail about it and their what how they come up where what the future needs are.

Absolutely. It's on the 18th of November. They'll be here to do another workshop and to present their So mine was building the foundation tonight. Theirs is to really fine-tune and and be the point of the spear to show you why and why next door and why it's important to make this capital investment in public safety. Do we have any additional questions from council? Comments, concerns, Mr. Ford, Mr. Jones, thank you very much. You're welcome.

I think this is everything that we have for our workshop. We're a little bit late, but a lot of great information. So, thank you very much. At this time, we we need a short amount of time for everything to upload. So, our council meeting is going to start just a few minutes late, but if we can get everyone to hang tight, this workshop is over and we'll start as quickly as possible.