City Council - workshop

2026 we're going ahead and call this to order for our budget workshop we're called to order the workshop itinerary a discussion of matters regarding the fiscal year 2026 to through to through 2027 budget preparation including but not limited to one general fund revenue and expenditures and number two other items needing council direction presentation made by finance director jonathan flores good morning you're on a goal hard stop at 3 15.

All right. Jonathan, let me jump in real quick, if I may.

Mayor, I'll be very brief. First, Council... You've said that before. I know, I've said that before. I know it's over, but you're keeping it going here. I want to thank the Council and the Mayor for the opportunity to have this discussion. I think it's been fruitful to be able to have meetings before this and be able to bring this for public view and to be able to understand what's going on with the budget. But I also think it's beneficial... to thank the city staff that's invested the time to put this budget together. I know the finance team, the budget team, several of the departments that will present today have had a hand in getting this budget assembled, so I want to thank them for their time, as well as the city manager's office staff. not to steal too much of Jonathan's thunder, what he'll talk a little bit about is the challenges that we're facing as a municipality. And that is not something that's unique to us. Just in a quick search last night, looking at really West Texas cities, whether you look at El Paso, Lubbock, Odessa, Amarillo, Midland, they all have tax rate increases that are going to be proposed. Now, they haven't been voted on. They're all increases that are taking place. And so I think the common thread between those cities is that there's inflationary costs that we'll talk a little bit about. There's personnel costs that are adding up and cities are having to contend with that. And so I just wanted that seed to be planted as we start these budget discussions that we're not alone in the struggles that we're seeing related to our budget and there are challenges that we'll need to overcome with council's direction. And so with that, Jonathan, you can have it. Thank you for that brief comment, Phillip.

Yeah. JUST TO LEVEL SET ON WHAT WE'LL BE DISCUSSING TODAY, WE'LL BE GOING OVER THE GENERAL FUND. WE'LL START OFF WITH WHERE REVENUES ARE CURRENTLY AT, WHERE EXPENDITURES ARE CURRENTLY AT, AND THEN WE'LL GO OVER A COUPLE SCENARIOS AS WELL AS THINGS TO CONSIDER IN THIS BUDGET. To start off, we always start off with property tax. Property tax is made up of two factors, the first being the appraisal district sets taxable values, and then the tax entity set a tax rate, and so that's made up of the school district, the city, the county, each one of those has their own tax rate. Those two values are then put together, and that's what citizens see on their tax bill. We receive certified valuations on July 23rd, We worked through a T&T calculation. We will be going over the tax implications of those two values a little bit later in the workshop. We will be voting on a proposed tax rate September 1st with that adoption on the September 15th Council meeting. Before we get into actual values, how they came back, we just wanted to highlight a couple challenges that we see related to property tax, the first one being the 3.5% revenue cap that the State has limited on existing values. So we're not able to capture growth above that 3.5% cap. A couple years ago, we saw medical exemption changes from the State. This gave an exemption to facilities who produce medical products. It was an exemption on their business personal property, the inventory related to those. operations. We have a homestead and circuit breaker cap. The homestead cap is a 10 percent cap on growth of values for homestead properties, and then a 20 percent circuit breaker cap for commercial properties valued under $5 million. The other item that we see from year to year is the over 65 freeze. This is a freeze on the tax bill for individuals with homesteads and are over the age of 65. AND THEN NONPROFIT EXEMPTIONS, ANY TIME A NONPROFIT PURCHASES A PROPERTY IN TOWN, THAT COMES OFF THE TAX ROLL ONCE THEY RECEIVE THAT NONPROFIT STATUS FOR THAT PROPERTY. YES, SIR. IT IS 65 AND OVER. AND THEN BUSINESS PERSONAL PROPERTY EXEMPTIONS. THIS IS THE NEW EXEMPTION THIS YEAR. THE STATE PASSED AN ADDITIONAL EXEMPTION FOR BUSINESS PERSONAL PROPERTY OF $125,000. I WILL GO A LITTLE BIT INTO THE IMPACT OF THAT, BUT THAT TOOK ABOUT $170 MILLION OFF THE TAX RULE THIS YEAR. JUST A COUPLE, THREE SELECTIONS FROM THE PREVIOUS SLIDE OF THE ACTUAL IMPACT THAT THOSE ITEMS ARE HAVING. HOMESTEAD AND CIRCUIT BREAKER CAPS HAS EXEMPTED $154 MILLION OFF OF THE TAX ROLL. IF WE DO THE TAX RATE CALCULATION, THAT WOULD BE A LOSS IN REVENUE OF $1.2 MILLION. The over 65 freeze this year totaled $625 million. That is almost $5 million of a tax equivalent. And then the new business personal property, which I mentioned earlier, this number states that value a little bit higher at that $179 million. That is business personal property exemptions in total. and that tax equivalent is about $1.4 million. So we see major exemptions from the state that the state is offering as well as the local option for the over 65 frees kind of impact our ability to levy a tax rate to fund maintenance and operations activities. Now for the actual valuation that we received from the appraisal district this year, certified valuations totaled $8.3 billion. This was about a .99% increase on existing value, so not quite 1%, and not up to the 3.5% cap from the state. So there's some growth there that we could have on the tax rate side. New values came in at $99 million. This was a slight decrease from last year, or this was a decrease from last year, but it is around the area where we normally expect these new values, which is around 100 million. And then tiers values came in at $249 million. Those grew by 3.93%, which is above what normal existing values outside of the tier zone have grown. Moving over to sales tax, just a brief overview. The state receives 6.25% of sales tax, the city receives 1%, the development corporation gets another half of a percent, and then the Tom Green County gets a half of a percent as well. We had good news in the month of August, 10% increase in August compared to the same month in the prior year. This was a part of an overall trend across the state. I believe across the state, sales tax was up 14%, so we saw a big increase across the board. so we're going to be diving into this number a little bit just for additional context we saw seven percent increases in the last two months prior to this um this collection in august so we've seen suspects trend up which is a good thing we what we just want to be cautious with is that that cell sex is going to continue to be received that it's not related to one-time construction projects or just temporary market conditions So we will be reviewing that. But year to date, the good news is that we are up 4.06 percent collections over the prior year, and then our overrevenue budget is $1.1 million year to date. So those are good numbers. This next slide, we just wanted to show you that trend for fiscal year 24, 25 and 26. And currently right now we're budgeting a little bit less than that 4% increase. So the projected year end of 26 is a little higher than fiscal year 27 starting budget. I THINK WHAT THIS SHOWS IS THAT WE HAVE A LITTLE BIT OF ROOM TO CAPTURE ADDITIONAL SALES TAX BUDGET IF WE WOULD LIKE. CURRENTLY, FY27 IS BUDGETED AT 2.87%. WE CAN PROBABLY PUSH THAT UP TO 3%, GET A COUPLE ADDITIONAL PERCENTAGE POINTS ON THE SALES TAX BUDGET FOR NEXT YEAR. WE ARE ALWAYS GOING TO WANT TO MAINTAIN A CONSERVATIVE APPROACH TO BUDGETING THAT SALES TAX JUST BECAUSE OF VOLATILITY. WE WON'T PUSH IT UP TO THAT 4%, BUT ONCE WE GET EXTRA DATA ON THE AUGUST SALES TAX, WE WILL MAKE SURE WE CAN BUDGET THAT 3% WITHOUT OVER-EXTENDING OURSELVES. WE WILL TAKE PROACTIVE ACTIONS ON THE FRONT END SO WE DON'T HAVE TO TAKE REACTIVE MEASURES ON THE BACK END. ON THE PROPERTY TAX BUDGET, SO THIS IS THE CURRENT VALUATIONS THAT WE RECEIVE FROM THE FRAZILE DISTRICT TIMES THE CURRENT TAX RATE, WE WILL SEE AN INCREASE IN THE PROPERTY TAX BUDGET OF $579,000. ON THE SALES TAX BUDGET, WE ARE PROJECTING AN INCREASE OF $730,000, AND THAT CAN RISE A LITTLE BIT BASED OFF CURRENT SALES TAX NUMBERS. THE OTHER TAXES LINE IS DECREASING $54,000. THIS IS PRIMARILY A DECREASE TO FRANCHISE FEES. THIS LINE INCLUDES THINGS LIKE TELEVISION AND TELEPHONE FRANCHISES. WE HAVE SEEN DOUBLE DIGIT DECREASES OVER THE LAST COUPLE OF YEARS IN BOTH OF THOSE FRANCHISE FEES. AS PEOPLE ARE BEGINNING TO CUT THE CORD FROM THEIR CABLE, THEY ARE NO LONGER HAVING HOME PHONES, WE HAVE SEEN THAT TAX DECREASE, SO WE ARE PROJECTING ANOTHER DECREASE FOR NEXT YEAR'S BUDGET IN THIS OTHER TAXES LINE. CHARGES FOR SERVICES IS INCREASING $942,000, AND THIS IS DUE TO THREE MAJOR ADJUSTMENTS TO CHARGES FOR SERVICES, THE FIRST ONE BEING WE ARE BUDGETING AN ADDITIONAL MILLION DOLLARS IN AMBULANCE REVENUE FOR NEXT YEAR. WE HAVE SEEN THOSE COLLECTIONS COME IN A LITTLE BIT MORE STEADILY, AND SO WE FEEL CONFIDENT IN MOVING THAT BUDGET UP, AS WELL AS INCREASED PLANNING AND PERMITS REVENUE FOR NEXT YEAR, JUST BASED ON THE ACTIVITY WE ARE SEEING AROUND THE COMMUNITY. WE ARE BEING CONSERVATIVE WITH THAT NUMBER AS WELL. BOTH OF THOSE ARE OFFSET BY A DECREASE IN MUNICIPAL COURT REVENUE FOR THE FINES AND FEES THAT WE ARE SEEING BEING COLLECTED. And the other line there, we're seeing an increase of $420,000. This is made up of indirect cost and a $200,000 contribution from the Water Fund. That contribution from the Water Fund goes to help fund the lake patrol out at the lake. So overall, all those increases and decrease total to additional revenue for next year of $2.6 million. AND THEN ON THE EXPENDITURE SIDE, EVERY SINGLE ONE OF THESE LINES IS SEEING BIG INCREASES FOR A COUPLE THINGS. THE FIRST ONE BEING HEALTH INSURANCE. HEALTH INSURANCE ACROSS THE BOARD IS INCREASING. WE'VE BUDGETED HEALTH INSURANCE IN THESE PRELIMINARY NUMBERS AT THE FISCAL YEAR 26 BASE RATE. OUR BENEFIT CONSULTANT IS EXPECTING AN INCREASE FOR NEXT YEAR, AND WE'LL GET INTO THAT A LITTLE BIT LATER IN THE PRESENTATION. BUT JUST FOR EXAMPLE, IN THE PUBLIC SAFETY LINE, GROUP INSURANCE INCREASED $687,000 TO GET US TO THAT FISCAL YEAR 26 FUNDING RATE. A COUPLE OTHER THINGS THAT ARE INCREASING ACROSS THESE LINES ARE VEHICLE MAINTENANCE. and it communications costs and so those are the majority of the increases in these line items i do want to highlight health health is decreasing almost 8 000 next year we're shifting some of the salaries in the health department specifically related to nursing over to some grant funds and so we're able to shift some of that burden out of the general fund to those grant funds And then in the transfers outline, we are seeing a decrease of $1.8 million. This is related to the rolling debt program that we spoke about this morning. This is a transfer out for equipment replacement that was funded on the MNO side, this general fund side, but is now being shifted over to a rolling note program, which will be funded by the debt service part of the tax rate. This is just a breakout of that transfers out. We wanted to highlight the grants line here, $43,000 increase. This is related to an increase to the nutrition program. We currently provide lunches for senior citizens out at the station 618. The state has reduced the grant funding for this program. This is a grant funded program. And so as the state has reduced their funding, we've decided to step up and to continue that program, fund the additional gap that we expect for next year. The capital line here, this is that $1.9 million that we spoke about for the rolling debt. Fairmount Cemetery is increasing $8,000 to help fund their operations and maintenance, and the sports complex is seeing a decrease in their general fund contribution just based on the fact that they're expecting to see additional tournament and event revenue out of the sports complex. The rest of the transfers are staying flat. Fort Concho, Stormwater, and intergovernmental lines are all staying flat. JUST A QUICK GRAPHIC ON TOTAL REVENUES AND TOTAL EXPENDITURES AS THEY STAND RIGHT NOW. TOTAL REVENUES BY SOURCE, PROPERTY TAX MAKES UP 49%, ALMOST 50% OF OUR REVENUE BUDGET. SALES TAX IS 25% OF OUR REVENUE BUDGET AND THEN OTHER TAXES, CHARGES FOR SERVICES AND OTHER MAKE UP THAT ADDITIONAL AMOUNT. ON THE TOTAL EXPENDITURE SIDE BY DEPARTMENT, PUBLIC SAFETY MAKES UP ABOUT 60% OF OUR TOTAL EXPENDITURE BUDGET, AND THAT DOES INCLUDE FIRE, PD, MUNICIPAL COURT, AND FIRE MARSHAL. AND THEN 14% OF THE EXPENDITURE BUDGET IS MADE UP OF GOVERNMENT AND ADMIN. THESE ARE YOUR CMO, LEGAL, HR, FINANCE, THOSE DEPARTMENTS. AND THEN 12% IS MADE UP OF PUBLIC WORKS, 6% IS PUBLIC SERVICES, AND 8% IS OTHER, WHICH IS MAINLY MADE UP OF That is primarily development services, health, and some of those smaller departments. One of the things that we highlight every single year in this graph is our property tax really is set aside to fund public safety. We want that to kind of match up. If you add in the charges for services for ambulance revenue as well as SRO revenue for the school district, we do fund public safety, property tax plus those charges for services fund public safety within $250,000. as the budget stands right now so that's that's a good trend that always has that hasn't always been the case and so um we're happy with where the budget stands currently in that regard Just a quick budget summary and some of the things that we're adding into this budget. Public safety is seeing an increase for fire department incident command software as well as some inventory software. We're seeing increases specifically related to police training and some software increases. The sports complex is having a maintenance worker turn from part-time all the way to full-time. And then human resources are seeing a software package increase as well. And then one of the things that we were able to do with the comp and class study this summer was we identified employees that were compensated 85% below the market rate, and we brought them at least up to the 85% market rate. So that adjustment's built into this budget as well. One of the things that we did on the revenue side was a departmental fee review. We saw some changes to fees this year, not major impacts. Most of the changes that we saw for charges for services were activity related and not fee increase related. And then again, the rolling debt implementation, which did free up about $1.9 million in the general fund for us to reprioritize. So just as a picture, our original budget currently budgets total revenue at $104 million, expenditures at $102 million, and contractual increases at $641, which are the items that we showed in the slide prior. ONCE ALL THAT IS SAID AND DONE, WE HAVE MARGINAL REVENUE OF ABOUT $1.3 MILLION. WE WILL GO OVER A COUPLE OF ITEMS THAT WE CAN USE THAT ADDITIONAL MARGINAL REVENUE FOR. THE FIRST ONE BEING HEALTH INSURANCE. VERONICA CAN COME IN AND ADD ADDITIONAL CONTEXT AS NEEDED, BUT THE CURRENT BUDGET FUNDS HEALTH INSURANCE AT THE FISCAL YEAR 26 RATE. HUBB IS CURRENTLY FORECASTING AN 8% INCREASE IN HEALTH CLAIMS FOR FISCAL YEAR 27. And if that holds true, the general fund will need an additional $1.8 million for fiscal year 27 just for the health insurance budget. So that's one impact that we're seeing. And then the next impact we'll talk about is the compensation classification study.

Yeah.

So sorry about that. Okay, so today we're going to talk about the results of the class and comp study. More importantly, what we do with those results. I want to start by putting this discussion into context. So council approved a class and comp study because we wanted an objective assessment of the compensation structure and how that compared to the market. We want to just simply talk through the numbers, understand what it means for the city, why it matters, and talk about how we can responsibly address the findings. We have a responsibility, obviously, to make sure that our comp structure that we use to attract and retain and develop our employees is competitive, internally appropriate, and financially sustainable. So the question today isn't whether or not this comp study found any disparity or issues. It did. The question really is how do we responsibly address those findings. So on this... you will see the results of that. At first glance, you'll notice that the non-civil service group was on average approximately 4% behind market. But I do want to be careful that you know that average doesn't tell the full story. While the average is 4% behind market, 244 positions were more than 5% below market. 37 positions were more than 15% below market. So this isn't a situation where every employee is underpaid. It's really just a situation of the study identifying where those gaps are.

We took a couple cities out of our market, correct?

We did. We took out Metroplex just because the environment for the Metroplex is quite different than what we have going on here. And I do have a list of those cities if you'd like for me to go through.

Why don't you give us a quick list on that?

We've got City of Abilene, ASU, some of those are not cities, they're just local entities. City of Beaumont, City of Brownsville, City of College Station, City of Denton, Killeen, Louisville, Lubbock, McKinney, Midland, Odessa, Plano, Round Rock, Temple, THE STATE, TOMBRING COUNTY, TYLER, WACO AND WICHITA FALLS. LIKE I SAID, WE DID ELIMINATE THOSE CITIES FROM THE STATE. THANK YOU. As I mentioned earlier, the study did identify specific areas of significant market disparity, and I do want to make that distinction as we talk about the investment you're considering because we're not proposing that everybody across the board get some sort of an increase. We really want to focus on where we have those disparities compared to the market. We are proposing to address identified disparities where the data tells us that our compensation structure is not appropriately positioned. We have made some progression this fiscal year. Those 37 positions that were more than 15 percent behind market, we were able to bring those up to no more than 15 percent behind market, but they still are behind the market. The police and fire results are particularly significant. Police averaged 16% behind market, and fire averaged 11% behind market. The study did identify that there were structural issues within pieces of that pay plan, so every employee and every rank for police and fire would be impacted by any study adjustment. That matters because compensation structure isn't just about what we pay, obviously. It determines where we start people within the pay plan, how they move through the organization, and whether the pay structure continues to make sense as the employees move through their career with us. This slide really is a recap of what was presented to you in February. When the study results were initially presented, several options were developed to address some of those findings. When we presented this to you, the results were fairly new and we had not had discussions with police and fire in terms of what their priorities were. For example, maybe they wanted a certain percentage between separation between their ranks. So those are all things that we have since discussed with them. And so some of the numbers you're going to see today through Jonathan's presentation might be slightly different, but the goal is still the same, to bring those to 100% of market and address some of those findings. There was also a number of additional benefits discussed in February as part of the overall work to include the vacation structure, holidays, paid parental leave, and extended service hours. There is still value in each of these discussions, and I'm happy to go through those in detail with you. However, based on the budget recommendations you're going to see today, I would like to keep the focus on funding that class and comp study. One additional item that we are recommending consideration is the addition of the Juneteenth holiday as a recognized holiday. It currently is not under our structure. That would bring the city's holidays to 13 with the same adjustment we currently have whenever Christmas falls on a particular day. And that is consistent with the county's schedule currently. So these are the results of the study. I'm sorry, these are the recommendations of the study. We are recommending a three year implementation period. I do want to emphasize that point because I think that the three-year approach is one of the strengths of this recommendation. As you saw two slides ago, if you implement this in a one-year period, it is a significant amount of money. I think it was anywhere between $3 to $4 million when I brought it forward. initially. Doing it in a phased approach gives the City a predictable financial commitment. It allows for adjustments to be incorporated into the budget over time, and it gives us the opportunity to continue to evaluate the market as we move forward. So three years isn't delaying in addressing the problem, it's a financially responsible strategy to addressing it, if it's done correctly. As you can see, the first year's cost is around $2 million, the second year is a little bit less, and the third year should be pretty comparable to that second year. I do want to be transparent that these figures do not include the benefit cost. What you're going to see from Jonathan and his numbers does include the benefit cost.

So, Veronica, what would be the cost on benefits? Would it be 15%, 16% of that number? No, we're going to hold you to it. Just somebody give me an idea. Hebert, you got an idea? No.

It's usually about 30%.

28% to 30% of that cost will be an additional in benefits on top of that.

Yes, sir, that's correct.

So for the non-civil service employees who are not impacted by the study, we are recommending a 2% COLA. There is also an important distinction between a COLA and the class and comp adjustment. A COLA and a class and comp adjustment do address two different problems. A COLA recognizes that the cost of living has changed. A class and comp adjustment addresses whether the underlying pay structure is appropriately designed compared to the market. We cannot use a COLA to solve, obviously, a class and comp issue, so we would not be recommending to apply the same amount to everybody, rather making sure that we're addressing those gaps specifically. The consultant does recommend a COLA during a multiyear implementation simply because the market continues to move. So addressing both the compensation adjustment every year in addition to a COLA is what's being recommended. He indicated it would be anywhere between 2% to 4% depending on that market year. We don't want to create a situation where employees who are already appropriately positioned in the market receive nothing, so that's the reason for the COLA this year. This does, however, allow us to address the economic environment while also reserving the largest or larger adjustments for positions that are behind market. For PD, the increase would be anywhere between two to nine percent, depending on the rank, and for fire, anywhere between 2 to 7 percent for the rank. I think it is important to also talk about another issue that needs to be considered when making these decisions. There is a cost to doing nothing, obviously. If the decision is made not to fund this, then the market continues to climb. We continue to fall behind. And every year we'd have to come back and talk about how to address that gap. I do also want to connect, obviously, this recommendation to Council's priorities. Council has identified public safety, infrastructure, and compensation as a priority, so neither priority can be delivered without the people that do the work. We can fund equipment, facilities, infrastructure. Without those operators, though, there's still an impact to the delivery of service. So compensation is not separate from our strategic priority. It's one of the mechanisms that allows us to execute those priorities. What we're asking council to consider now is whether we're willing to make the investment necessary to continue that work in a deliberate and financially responsible manner. Again, it is about making sure that employees are appropriately paid for the work that we are asking them to do, maintaining a competitive structure and giving the city a compensation system that we can manage. The study was requested so that we would know where we stood within the market. We now know that. We know where we are competitive, we know where the gaps exist, and we know that we can address it in this manner. This recommendation gives you the ability to do that. Again, it's an investment in the city's ability to recruit, retain, and develop the people who deliver the services that our citizens expect. So with that, I'll take any questions.

Mayor, if I may... QUICKLY, I APPRECIATE VERONICA TYING THIS BACK INTO THE STRATEGIC PRIORITIES THAT COUNCIL HAS SET THAT REALLY IT TAKES THE PEOPLE TO, AND WHEN WE SAY PEOPLE, THE STAFF OF THE CITY TO BE ABLE TO IMPLEMENT ANY OF THE PRIORITIES THAT ARE OUT THERE. SO IT'S DEFINITELY GREAT THAT THAT'S POINTED OUT AND THAT'S PART OF THE BUDGET DISCUSSION GOING FORWARD AND WE'LL TALK ABOUT POTENTIAL AVENUES TO FUND THIS COMPENSATION STUDY. BUT I DID WANT TO SHARE, MAYOR AND COUNCIL, BEING HERE JUST ABOUT TWO AND A HALF WEEKS, I HAD THE OPPORTUNITY TO MEET WITH EVERY DIRECTOR AT THIS POINT, AND I'LL TELL YOU A COMMON THEME AS IT'S BEEN DISCUSSED BY VERONICA IS The recruitment and retention of staff and that goes back to to pay being behind schedule. So this is a priority that has been labeled by City leadership as it relates to keeping the staff retaining the staff and again going back to those comparison cities many of the areas that they're looking at for tax rate increases or other type of funding mechanism is due to staff relations that are out there and I will also share that beyond hearing this from staff, this being a posted public meeting, we've also heard heavily from both the Police and Fire Association in being in support of something related to the compensation study. And again, with this being a posted public meeting, they're here in support of this initiative as we move forward. And they've also been part of the dialogue as it related to the actual study that took place and Veronica's helped foster that discussion with them. So Mayor, I just wanted to point that out that this is an important aspect that's looked at for the budget going forward.

At this point, any other questions from the council? Patrick?

On these numbers, is this any cost of living in the future or is this just to get them to it and then with a non-civil service, is that 2% counted in that $400,000 number?

No, the 2% COLA is not counted in these numbers. And in year two and year three, it is also now not counted in those numbers. That would be an assessment that we would have to do based on the market to see what would be appropriate. But like I said, the consultant did indicate that it would typically be anywhere between 2% to 4% in addition to these numbers.

So this is just to get us in three years to get them where they should be now.

Yes.

We're probably still playing catch-up in three years.

Correct.

Okay.

Well, that's what the purpose of the additional COLA would be, to get us to keep us on track as well. And we'll show all those numbers combined in future slides as well.

So is the total of that getting close to 2.5 million? Is that what you're saying needs to happen now?

Is that the amount?

Yes, ma'am. I have the number loaded with benefits with a 2% COLA. That ends up being $2.8 million.

Okay, I just didn't, we're not having any totals on there. It's hard to see what the total impact is, the bottom line.

And that would be the impact for the first year and the first year alone.

$2.5 million? $2.8 million.

Yeah, $2.8 million. And then like Veronica mentioned, we would go with our financial forecast for year two and three and at least model some kind of growth, some kind of COLA adjustment as well so we can see what we'll be able to afford in future years as well.

How do these numbers, I don't know how to say this correctly, last year everybody got a 5% raise across the board. So where does that fit in with, wouldn't last year's 5% increase be included in year one?

No, ma'am. So last year's 5% increase then created a new base value that then the study was conducted on. So this is already factoring in that 5%. So that 5% probably did, especially for some physicians, help us get caught up in some areas, but that became the new base for this study.

Okay, thank you.

The next impact that we want to talk to you guys about is the fire pension. The State Pension Review Board has identified the fire pension plan for improvement. This is primarily made up of a couple different things. First, they identified some of our actuarial values and assumptions to be out of line with what they would expect. In addition, they also identified the fact that firefighters Our firefighters contribute more to their pension plan than any other fire pension in the State. They are the highest contributors, which is a sign that there is no more capacity for firefighters to continue to support this plan. The City really does need to step up. to some extent and so what the fire pension did is they authorized an actuarial study to be done that's currently being conducted but we do have some preliminary results and gave us three to four options two of those options i do feel are reasonable for the city depending on the different funding mechanisms that we'll speak about a little bit later the first one is a one and a half rate increase over the next four years SO WE CURRENTLY CONTRIBUTE, THE CITY CONTRIBUTES 20.20% TO FIREFIGHTERS, AND SO FOR FISCAL YEAR 27, THIS WOULD RAISE THAT RATE UP TO 21.7, SO THAT ADDITIONAL 1.5% RATE INCREASE, AND THEN EVERY SINGLE YEAR FOR THE NEXT THREE YEARS AFTER THAT, WE'D SEE AN ADDITIONAL 1.5% INCREASE. The next option is a 4.9 rate increase for fiscal year 27 and a $1.2 million one-time funding. This would get us to the point where we would fund the pension plan according to what the review board wants us to in one year. So it would take care of us and get us to the point where the pension review board SHOULD BE ACCEPTABLE WITH THE ACTIONS WE'VE TAKEN TO GET THE PENSION FUND IN A STATE THAT THEY CAN BE ACCEPTING OF. SO WE'LL GO OVER THE DOLLAR RATE IMPACTS OF BOTH OF THOSE IN SOME FUTURE SLIDES WITH THEIR ADJUSTMENTS. SO JUST OVERALL, THIS IS KIND OF WHERE WE'RE AT JUST BASED OFF OF THOSE ITEMS THAT WE SAW STARTING WITH GENERAL FUND EXCESS REVENUE. THIS IS THE MARGINAL REVENUE THAT WE POINTED OUT EARLIER. THIS IS THE $1.3 MILLION. And then we have proposed additional department requests of $887,000. These requests include things like additional ammunition for the police department for training, software integrations. We also have some additional FTEs built into this number for a combination inspector for the permits department. This would allow them to do some more inspections. MORE OFTEN. ALSO IN THIS NUMBER, THE BIGGEST PIECE OF THIS NUMBER ACTUALLY IS A STREET AND BRIDGE CONCRETE CREW THAT COST US ABOUT $342,000. THAT CONCRETE CREW WAS FUNDED WITH ONE-TIME MONEY. THAT ONE-TIME MONEY HAS RUN OUT AND SO WE'RE PROPOSING TO BUILD THAT INTO THE BUDGET. SO THAT'S A PART OF OUR PROPOSED ADDITIONAL DEPARTMENT REQUESTS AS WELL AS SOME ADDITIONAL ANIMAL SERVICES FOR MEDICAL SUPPLIES, SOFTWARE FOR FINANCE AND BUDGET, AND THEN A Purchasing contract specialist is also built into this line. That contract specialist would help departments and vendors with the contract process help shepherd that process. So hopefully we can turn around those contracts a little bit faster. And then the next three items, with class and comp being the first bucket, police comp and class study over three years, and at least a 2% COLA is $1.1 million. For the fire department, the total's $916,000. For civilians, it's $809,000. And so those added together is that 2.8 million dollar number I shared with you earlier. And then health insurance to get us to the fiscal year 27 needed amount is $1.8 million. And then that fire pension increase for 1.5% increase, which would lock us into that four-year plan, is $235,000. And one last note on that fire pension. That fire pension isn't unique to us. We've seen a lot of pensions across the state receive the same kind of standards from the PRB. And so we're... We're not the only ones impacted by this, but this is one of the options that we can take to remedy the situation. AFTER FACTORING ALL THOSE ITEMS OUT OF OUR EXCESS REVENUE, WE'RE SHORT $4.4 MILLION. SO WE NEED TO TAKE SOME ACTION TO FUND THAT GAP AND OR, YEAH, WE NEED TO TAKE SOME ACTIONS TO FUND THAT GAP AND WE'VE GOT SOME OPTIONS FOR YOU GUYS HERE BEGINNING WITH PROPERTY TEXTS.

Jonathan, would you mind going back to the previous slide? I just wanted to point out, counsel, you see the $4.4 million number that we're short at this point, and you talk about the proposed department requests that are needed. Jonathan mentioned that there are items that are needed, such as additional training funds for the police department, as an example, that were out there. These items were submitted as requests. They were vetted by the city manager's office and provided a rank as far as what was needed to be able to be funded. And so there's not a lot of fluff in there. When you see that there, these are items that are needed to be able to continue to serve the citizens of San Angelo. But when you look at this $4.4 million number, the first thing that would would be looked at as it relates to a number here would be the class and comp study that the council asked us to fund as far as a study. That would be something that we would not be able to move forward with in the position that we're currently in. And so we'll talk about some options as we move forward.

Jonathan, real quick on that. What's the discrepancy in the numbers of those and the ones we just saw that had the three-year breakdown? The three-year breakdown? They're not adding up to the same?

It's benefits, and then there is, especially on the civilian side, at least a 2% COLA for those individuals who aren't receiving a market rate adjustment. So everybody will at least be receiving that cost-to-living adjustment of 2%. So those are the difference in those numbers plus the benefits loaded into them.

So this is a yearly amount, and so like police was $877,000, so $300,000 in benefits. Yes, sir. Gotcha. Thank you.

ONE OF THE FIRST OPTIONS WE WANT TO DISCUSS WITH YOU GUYS TODAY IS PROPERTY TAX. I MENTIONED EARLIER THAT OUR VALUATION DIDN'T COME IN ABOVE THAT 3.5% VALUATION, SO WE HAVE SOME ROOM TO INCREASE THE TAX RATE. THE TAX RATE THAT'S ALLOWABLE UNDER OUR CURRENT T&T CALCULATION IS .0195 PER $100 VALUATION ADDITIONAL TO THE TAX RATE. THAT WOULD BRING OUR TOTAL TAX RATE UP TO .8142. PER HUNDRED DOLLAR VALUATION. ONE OF THE THINGS I WANT TO NOTE ON THIS SLIDE IS STREET INFRASTRUCTURE, WHICH IS PROPERTY TAX SET ASIDE FOR STREET INFRASTRUCTURE WOULDN'T BE INCREASING AND OUR DEBT SERVICE RATE WOULD NOT BE INCREASING EITHER. With this change on the maintenance operations rate, this would bring in an additional $1.5 million into the general fund. And then on the citizen impact side, on a median taxable homestead of $212,000, that would equate to an increase of $40 a year to their tax bill, which evens out to $3.5 a month. And the next item we want to discuss is a right-of-way fee.

Good afternoon, Mayor, Council. Thank y'all for letting me come back before y'all again with this one more time. We took y'all's feedback after the last meeting. A lot of what I'm gonna present today is a rehash of what y'all saw in the last meeting, but I did wanna address some of the key feedback points that we got out of that, just kind of points of logistics and points of operation that I think are important as we look at possibly implementing this fee and moving forward with it in the future. The first of that being the billing structure. I want y'all to be aware that we are not setting up an additional billing structure for this. The right-of-way infrastructure fee will be billed within our current water bill that exists. It'll just be another line on that water bill, so we don't have to set up something new or do a new process in order to do this. It's simply just integrating this into the processes and the bills that the citizens and the businesses already receive today. I want you to make note that this is a dedicated fund, so it's an enterprise fund. It'll earn its own revenue and generate its own expenses within this. It'll be dedicated to those activities that are focused on the right-of-way and the use of this program. The grievance in the appeals policy is always an important issue. We wanna make sure that we have a solid policy and process in place in order to make sure that we're billing appropriately and that those bills are accurate. So we wanna be able to allow anyone that has a question on their bill or or feels that there's a discrepancy to come in address it with staff and go through that process so it is going to be an administrative process as we have it proposed so it will start with our customer service reps it will escalate up to the director level and then ultimately to the city manager level if we can't get it get it vetted out and done at the director level The appeals policy though is gonna be very straightforward. It's what we follow in our stormwater program right now. So again, it's another process that we already have established. Everyone's well aware of it from an internal application standpoint. So this shouldn't be anything that's disruptive to our normal business operations. The low income and the financially burdened accommodation was a big topic and point of concern for several council members at the last meeting, if you'll remember. So we wanted to make sure that both you all and the citizens that may be listening to this know that there is an accommodation that we're proposing for this. We already have an established program set up through the Water and the Sewer Fund where we contribute to the Contra Valley Community Action Agency. In the water bill right now, we contribute $50,000 And what that is is anyone that is struggling financially can go to the CVCAA, make an application with them. They vet out their particular situation. And if they qualify, then the CVCAA would pay the city's water bill or utility bill for them. What we would encourage in this program is to contribute some of our revenue stream to that program. So we would throw in $100,000 into that program and we've also proposed another fifty thousand dollars out of the water utility so we'd be taking that program from 50k that it is today up to two hundred thousand dollars in total so that that program is very popular it's been very helpful in the past it's been in place for about five or six years now so again another well-established program that we'd be piggybacking off of that we're not having to reinvent the wheel and figure out as we go If you'll remember this whole program or the way that we figure out the non-residential rate is based on a land use table adjustment. In order to make sure that we as staff can implement this thing administratively very quickly and very timely, we wanna make those any adjustments that are needed to that table administratively. The alternative is we would incorporate that table into an ordinance and that we would have to bring any adjustments to that table back to council. It would take two readings of the ordinance to change it and then it would be implemented. That just moves too slowly whenever you're talking about a monthly bill that's incorrect and people having to potentially overpay. We want to move faster than that. So we want to make those adjustments administratively. We feel like in going through this process with the consultants, we have a very good idea on how those different categories are vetted and how they're decided upon, so we feel administratively we can make that decision, and if we gotta go up through the city manager's office, we will absolutely be able to do that. And we also wanted to make sure that just as with our stormwater program, that our city facilities are included in this bill as well. They generate traffic just like any other entity within the city of San Angelo does, so we want to make sure that they are also paying their share of the use and the impact on our right-of-way that they'll be generating as well. So city facilities will receive a line on their water bill just like every other entity in the city will be. Again, just for the sake of clarity and for the opportunity to ask any questions, I wanted to walk through the methodology of how we determine what our non-residential rate is gonna be in the city. If you remember, residential are pretty set. If it's a residential property, if you live in it, it's a set rate. So there's not a whole lot of discrepancy there, but in the non-residential side, there is a little bit more of a decision-making process to be had. So if you remember, every business has a type of operation that it functions in. In this case, it's a medical clinic. That clinic, that function is assigned a land use category, or in this case, a clinic, and it is calculated using a development unit, so per thousand square feet. So there's a formula that we use, in this case a 2,000 square foot clinic would be divided by that 1,000 square feet and then assessed a factor of 3.28, which is the number of trips that that clinic generates per 1,000 square feet. And that brings you over to the rate table on the right-hand side, which ultimately will determine what that monthly rate is that you would pay based on the number of trips that you generate as that particular business. So there's two options that we've presented on this. If you remember, I've talked about a comprehensive right-of-way and streets program for the city that we as staff have looked at, we've evaluated, and that we would like to implement. What this does is it takes our existing program It enhances it to give those services that we hear on a regular basis back from the citizens that we constantly get calls about and that we know that are potentially coming down the pipe in the future a way to fund those and to accommodate those as we grow this fund and we're again providing that service to the citizens in the city that we need as a whole. So those areas there in white, the street and bridge fund, the traffic operations department, and our equipment replacement are things that are happening today, and they're things that'll happen in both options here that I present to you today. The items there in blue, a fund balance accommodation, a signal replacement, alley maintenance crew, PAYGO projects, a construction crew, and a developer's overbuild accommodation. Those would all be enhancements to what we do today, but again, those are items that we hear back from, we get feedback from the citizens on what they would like. Hey, I need my alley fixed. Why don't y'all do anything here? I need a roadway fixed that's not going to be handled in our major construction debt service. A fund balance which would alleviate the burden that the general fund carries in the fund balance right now to a tune of about $3 million. A signal replacement. Several of those things, again, to build that comprehensive program that we feel like the right of way fund needs. In this particular situation, I would need about $16 million in order to fund all of those. Based on what our consultants put together, that brings a residential rate of $23 per home Or if you're in a multifamily, it would be $23 per door, if you will, or per unit. And then for the non-residential side, that rate would be anywhere from $50 a month up to $1,400 a month in that first year. We're also very well aware that we need to make sure that we keep up with those inflationary costs that have kind of got us into this position. because we haven't necessarily kept up with the cost of doing business in the past. And so we would propose a 5% escalator on this particular rate in order just to keep up with those inflationary costs, keep up with those health insurance costs that Jonathan mentioned earlier and everything else that may burden financially this fund. I want to make sure if we build this that it can be sustainable upon itself in the future and not have to burden the general fund in a few years coming back and asking for additional assistance. The other option is kind of a bare bones option. So what it does, if you notice there, all those blue items turned red, and so we are going to be able to fund exactly what we do today with this $10.5 million of what we would generate in this particular fee structure. So we would completely pay for the street and bridge department, the traffic operations department, and our equipment replacement. But there wouldn't be any of those additional services or activities that are there in red that we would be able to do on the $16 million. We're simply maintaining what we do today and providing the same level of service that we do today. In this case, the residential rate would go from $23 down to $15 per month, and that non-residential rate would be from $25 to $1,000, depending again on your particular function within your business and where you fell in that fee table. A few real world examples, y'all saw this at the last meeting as well, but again, I think it's nice to kinda see where that distribution is gonna fall on the non-residential side. So if you'll notice there, almost 40% of the businesses in town are gonna fall within that tier one. So depending on which option council wishes to go to, the 16 or the 10 and a half million dollar revenue generation, that's $50 or $25 a month, depending on which table we decide to go on. Again, on the right-hand side, there's several real-world examples, if you will, from businesses here in San Angelo and what they would pay underneath each of the different respective structures that we were proposing. I want to make sure that we understand that the 10.5 revenue generation, what that is, is right now those three areas in white are paid for by the general fund. It's a current general fund obligation. By utilizing this as an enterprise fund and generating its own fee, those funds would then be freed up within the general fund. So that's kind of what you're getting out of out of this. It's the same level of assistance, it's just funded in a different manner and it's freeing up those general fund dollars that are obligated today. So in summary, The two different programs side by side there. Residential rate at $23 versus $15. A $50 to $1,400 spread for the non-residential side or $25 to $1,000. And then your list of benefits underneath each one of those structures there as you see as well. So again, you can kind of see what you're, what you're getting or what you're giving based on the decision that you all want to discuss and ultimately approve today. So that is the final there. I'll leave that up as we go through and answer any questions that you all may have.

So, Patrick, let's talk about what we're going to capture here that we've never captured before. Talk about nonprofits, talk about county, go down a list of people that haven't paid taxes that this would capture, including ourselves.

So in short... Nobody is exempt from this fee. Everybody that owns a piece of property in San Angelo or lives in the city or does business in the city would pay some portion of this fee. meaning every non-profit would be would pay a fee so a church anyone with a non-profit designation i know the big one i'm just going to throw it out there shannon hospital they would contribute to this as well it catches everybody encompasses everything because everything has a traffic generation everything uses our right-of-way and we want to make sure that everyone is contributing to the maintenance of that for the good of the whole and the good of everyone in town. So we don't have any exemptions that we have planned for this. The only thing that we have is that, again, that low income or that financial needs accommodation.

And so we're using that study's suggested rates to establish these rates, correct?

That is correct, yes, sir.

Because in discussion earlier, I was thinking about... moving the non-residential rate from the $16 million over to the $10.5 million, but that seems to make things out of balance, correct?

So ultimately it's council's option or preference in order to what we adopt. The two tables before you is what our consultants put together objectively looking at our expenses for each of those programs, what the need is coming down, and how we would sustain that moving forward. So those are the two objective analysis that our third party consultant put together based on this right of way fee. Again, Council can change that and tweak that if that's the desire, but what we wanted to present as staff is what that objective result was.

In your opinion, it needs to stay where it's at, or is that something worth discussing?

In my opinion right now, I think ultimately I want the 16 million. I'm gonna tell you I want the 16 million because I wanna do good. I wanna kill it and I wanna blow it out of the water. But I also know that the 10 and a half in today's economic environment, both for the city and the citizens, the 10 and a half is also a more palpable approach. I would like to get the 10 and a half, let us get it implemented, let us get it going, and then we can assess how we're doing in the next year or two and see if any adjustments need to be made. But at this point, I think in today's environment, the 10 and a half is probably the most likely case of what I would recommend we go forward with. in order to get the program going, make sure we're sustainable, make sure we're protected by anything that the state and those outside pressures may push down on us so that we can take care of our infrastructure the way that we need to maintain it and that it meets the level of our expectations of not only the city council, city staff, but of our citizens as well.

If a nonprofit operates out of multiple locations in the city, and they are different sizes. Is there any adjustment made between the sizes of the operations, square footage-wise?

In this particular scenario, no, there would not be. There would have to be a different function, right? So if a nonprofit had a clinic in an administrative building, the administrative building would pay a different rate than the clinic would because of the difference in traffic generation that that particular activity generates. But as far as the square footage, there is not a square footage accommodation within this. That table, if you'll remember, is based off of the Institute of Traffic Engineers manual that's published nationally. This isn't something new. This isn't something we dreamed up. This is something that is implemented across the state and across the nation as far as a standard trip generation that's analyzed and put in as an average across, but it only works on how many trips does it generate and not necessarily a size accommodation.

We have spent almost $80 million over the last 10 years on rehabbing, rebuilding streets. Do either one or both of these take into account the ongoing maintenance on those brand new streets? And second part of that is, does it help you increase maintenance that you are not now doing?

It does address them within the statement of it does fund our annual seal coat program, which will touch those roadways that we rehabilitated. As staff, we've moved to a proactive measure. We wanna make sure that that investment is protected. And so once we make that large investment, that capital expenditure to rehab those streets, we're wanting to get in there and maintain them so that we can maximize that investment and make sure that they don't deteriorate. That being said, our seal coat program will go on top of those roadways, but in our current condition, AKA the 10 and a half, that is not a sustainable program for us. We've moved from an eight year goal that council gave us in 2016, and now we're sitting around that 12 to 14 year mark. In fact, I just had to cut our proposed seal coat for next year in half, and it was cut again in half last year for 2026. So you can see that I'm quickly losing ground within that program just due to the inflationary nature of that industry. It does not allow me to do anything enhanced. So as part of our alley maintenance, just kind of give you an idea of where staff's mind is. We don't want to go in and just seal coat an alley. What we would propose with alley maintenance is actually gearing up a crew that puts down, I think y'all are all familiar with HA5. There's another product that's similar to HA5 that city staff can put down. We can apply it in-house. It doesn't quite have the resiliency as HA5. That's why we don't put it on our roadways, but it would absolutely work in an alley. I'd want to gear up and do that with a crew that then can trickle over to a street maintenance program with that same function. A lot of the feedback we get is, I can't ride my bicycles after seal coat. It's rough to walk. It's rough to push my stroller down. We've talked about coming in with an HA5 or this type of product to smooth out that function. right of way, that gutter line, to try to give a little more enhancement quality. So we're not just saying we want to maintain alleys. We're looking at it from a comprehensive approach again. That's what the $16 million does. It gives staff the ability to really be creative and give back more than the $10.5 million does today. $10.5 million sustains me. It sustains the slow decline that I'm on today, given the nature of inflation.

Would that 10 and a half get you back to where you were before you've reduced by half and reduced by half? No, sir.

It maintains that process.

Would the 16 fix that?

The 16 absolutely would.

So that would be in your other stuff there, the pay go, I guess? No.

So the pay-go would be, there would be a combination of pay-go to doing additional roadways that our bond funds and our debt service would never touch. There was a request the other day for Mark Street. Let's look at Mark Street, right? That would be a pay-go type project. The Riverside Golf Club Road right out there that we just got through investing in that structure. I don't have money to do that road anymore. So I'm going to have to come up with a stopgap measure, some creative way to do that roadway. The 16 would allow me to do those type of projects that the 10.5 doesn't. The developers overbuild is one that we're gonna hear more and more about moving forward. The development community is asking us to help with the overbuild of their roadways and that public infrastructure. We as staff want to support that. We want to support that growth by partnering with those developers and paying for roadways outside of the 40 foot is what we would propose. In the current 10 1⁄2 structure, I wouldn't have any funding in order to do that. The 16, I would have a designated earmark to allow me to do that. Again, it opens up opportunities that I don't have today that we're hearing from our constituency and our citizens out there of programs that we need to do to make sure that our infrastructure is where our citizens expect it to be.

So to put words in your mouth, The $10.50 is only going to continue what you're doing, but the roads are going to continue to decline at the $10.50 because you're having to cut the program due to increasing costs. Is that correct?

That is not untrue.

So that is correct?

Yes, sir, it is correct. Okay. I just didn't want you to put the exact words in my mouth, so I came up with something that you wouldn't say.

That's the reason I like you, Patrick. Okay, thanks.

But again, as staff, the ten and a half does provide a benefit in making sure that we're protected from outside influences. That's the value of what this infrastructure fee is. and make sure that we can at least have a program that we can sustain that the state can't touch, they can't reduce our fees that are the tax revenue that we can generate that we're living off of today, and we can make sure that we can control this in-house and meet those expectations as best we can with the allowance for to come back in the future, assess the program, assess the evaluation, maybe add things slowly if we wanna do alley maintenance and not the other stuff, and then and then we can ease into it then at that point. But let's get the program in place and get it going at the very least, and then we can evaluate how it's performing and any adjustments we want to make there in the future.

Okay, Mayor. I kept my mouth long enough. I'm going to kind of reiterate what's been said down the aisle with both Tommy and Patrick. As long as we can maintain with this 10.5 annual revenue generator, maintain the infrastructure that we've got, I'm going to suggest that we stay that. 15 to 23, that's one thing, but I think they're going to say there's too many things in the last 18 months that have risen and they've impacted their households, and so I'd rather have the $15 per household than the 23. Any more?

Patrick, do you have a number, I don't know if we talked about it yesterday or not, taking that residential rate of 15 and putting that over there in the 16 mil column, what the difference would that be?

So if we, so right now the way, let's go back and you can see the numbers. In the 16 million annual generation in that kind of mid block right there, you see the weight of the residential and the non-residential numbers there. So the residential would be contributing, excuse me, 706,000 per month and the non-residential would be contributing 618,000 per month, right? In the And the 10 and a half, it's 460 and 405 per month. So if you were to shift those tables like the mayor was saying, if you were to shift the $16 million non-residential over to the, and combine it with the $10 and a half million residential, you would see $618 a month versus $405 a month. So it just... a margin of $200,000 extra per month, so about $2.4 million of revenue generation if you were to make that adjustment like the mayor was talking earlier.

Well, it's $8. Okay. $12,900. Thank you. Okay. Go ahead.

So we have not heard from the community in over 20 years, 20 plus years, almost 30. What would be the possible benefit of playing poker a little bit? If we stopped spending and proceeded with the comp plan, you might find that the community wants to fund you at the $16 million rate. Is that worth having a conversation about? We're so close.

I would wholly oppose pausing any of our maintenance activities. We've worked very hard as staff. Not suggesting you pause any of your maintenance activities. So the comp plan shouldn't affect maintenance, but I think what I'm hearing you say is take the 10 1⁄2 right now, get the comp plan in place, and then let's evaluate what the needs of the comp plan are to see how this fund could potentially support that comp plan. Did I rephrase that correctly?

I can live with that.

There's advantages to that for sure.

Mary, comments?

That's $2 million difference from the 10.5 to like what Patrick was performing. I am adamant about not passing any more cost on to the citizens at all. I mean, if at all possible. I mean, they have had to suck it up for... As long as this place has been a city. And we do it to them every year. Yeah, there's been some unforeseen things that have happened in the last 18 months. That's always going to happen. There's always going to be catastrophes that we have to try to get over. I like what Karen was saying, that the city might support some of this, but it's You know, even the county just stuck it to them the other day. I think we could go with the 10.5 and accomplish everything in there. It might require a little belt tightening, but that's exactly what this city has had to do. But it can be done. I believe it. Try harder.

We're already hearing from people.

Try harder.

Additional comments? Is that the end of your presentation?

Yes, sir.

Okay. You've heard us all. I mean, you can just say the consensus right now is the $10.5 million. We get that. If there was a way to always keep the residential burden as small as you can and some other ways to get it. But we understand that the demand for streets... and the ability to actually get some revenue out of people that have never paid revenue before, here's an option we can't pass up. All right, so we want to keep it as least invasive on our pocket as possible. But with that in mind, I think you've heard a consensus from the group what we're looking for. Patrick, thank you, sir.

Thank you. Appreciate your time.

Oh, excuse me, Aaron. Just trying to make up to Aaron back there.

I think our table is actually squeaking. If that's what you're hearing. Yes. Yeah, sorry. I'll try not to move as much as we go throughout the rest of the presentation.

Somebody's hearing aid for a little bit.

So we just want to level set on some of the costs that we're also seeing. Just as a general cost that we tend to anchor on is the municipal cost index. That's increasing about 4.86% as of June 2026. We're seeing increases in electricity utilities of about 5.11%. We've talked about health insurance. We can normally expect to see at least about a 7% increase in health insurance premiums from year to year. As far as our materials, the price of asphalt has gone up 13% since 2020. The price of chlorine, which we use to treat our water, has gone up about 31% since 2020. Fire engines have doubled since 2020. And even on some of our other equipment that we use, we've seen increases of about 50% to 60% since COVID as well. So we're seeing major inflations, which I'm sure we've been able to illustrate through some of the the specific items that we brought to your attention today. We also do have some additional funding requests from the departments. One of the things that we think would be a good value add as far as when it comes to public safety is a grant administrator. This grant administrator will help serve fire and PD in finding additional grant funding opportunities as well as giving us the expertise in those departments to chase after those opportunities as well. Hopefully gives us a higher opportunity conversion rate on those applications. Again, I want to bring up the fire pension one-time contribution. This would allow us to fund the fire pension in one year versus having to spread out that impact over four years. We currently have six frozen officers as well. That totals about $570,000 for each of those frozen officers or for those frozen officers altogether. PD has also requested additional drone scent software of $25,000. We want to also, outside of public safety, factor in some of the funding requests. Animal services for improved animal care services is about $80,000. Part of that's going to go to funding additional medical supplies for those animals out at the shelter. And then development services support, that $230,000 includes three additional FTEs, two GIS developers, one development technician. That development technician would help be kind of a concierge service, help shepherd developers through the development process. So if a developer has something stuck in the fire marshal's office or if there's something wrong with their application, they're able to assist that developer with support, hopefully speeding up the turnaround and and their development yes sir they could reach out and would that be kind of our rapid response yes sir so it'd be it'd be a position dedicated to helping the entire process all the way through walking through the different departments their whole application yes sir okay that's been needed for a long time And then finally, just other requests that we're not requesting funding this year, due total to about $4.2 million. So we wanna bring to you guys a couple options. So we've discussed a tax rate increase, what that would do, a right away fee, moving those costs to their own enterprise fund and what that would free up in the general fund. This first option here only looks at a tax rate increase, bringing us to that 3.5% cap. Again, that would give us an additional $1.5 million to marginal revenue, bringing that up to 2.8 million. the proposed additional department requests that we discussed earlier, comp and class adjustments for a three-year implementation with a 2% COLA, health insurance at 1.8 million, and then a fire pension contribution of one and a half. for $235,000. Now, in this scenario, the marginal revenue that's generated off of that tax rate increase is not enough to fund all of these priorities. We're short $3 million in this scenario. What that effectively means is that we would not be able to do a comp and class market rate adjustment under this scenario or a 2% COLA, as well as we probably would have to go back and look at some of those proposed additional department requests and pull some of those items out. So that's the first option we wanted to show you guys. The next option is no tax rate increase, but that $10.5 million right away fee. Again, what that does is that moves those street and traffic costs out of the general fund into their own enterprise fund, freeing up some additional marginal revenue. So marginal revenues adjusted up to $8 million in this scenario. You'll also notice that the departmental requests decrease in this scenario. Some of those requests specifically related to the concrete crew out at Street and Bridge will now be moved to the Enterprise Fund, so we're seeing only $545,000 in department requests. You'll also see adjustments in the comp and class and health insurance lines for those So those are slightly smaller than the previous slide. One of the things that this option enables is funding the fire pension in one year. So you'll see that one-time fire pension contribution of $1.2 million, and then a fire pension rate increase of 4.9%. THAT TOTALS OUT TO AN ADDITIONAL $769,000. WHAT WE'RE ALSO ABLE TO DO WITH THIS STRUCTURE, WITH THIS SCENARIO, IS FUND THOSE SIX FROZEN PD POSITIONS. WE'D ALSO BE ABLE TO FUND TWO OF THE THREE DEVELOPMENT SUPPORT POSITIONS AND GIVE AN ADDITIONAL HEALTH INSURANCE CONTRIBUTION TO FUND BALANCE OF $350,000. And that health insurance contribution really does go a long way. Next year, if we see claims that continue to stay high, if we see high claims, we won't have to come back to you guys and ask for as much. This helps us cover that gap in a scenario where claims exceed our expectations.

So that's one of the biggest kickers we've had to eat this year is that many million dollars in adjustment. Does this... rid ourselves, or is this better prepare us for that next year? Absolutely, yes, sir. Okay. Because that one was a hard one as well. That took away a lot of budget.

The last scenario we want to run by you is where we implement both the 10.5 right-of-way and the 3.5% tax rate increase. This would give us marginal revenue of $10 million. It would allow us to fund some additional department requests specifically, and I'll get that list of those additional requests It would enable us to fund 50% of a domestic violence case manager, some drone software. Oh, those are the totals. Okay. Let me pull the listing of the ones that changed. Let me help you here with this one. Yes, sir. No. Okay.

I thought I'd throw that out.

Yeah, and really what's changed from here, the last scenario to this scenario is we're able to fund that additional development support and give an additional health insurance contribution. Helping out there, Jonathan. Yeah, and we have some revenue over budget in this scenario as well. Our staff recommendation really would be that second option, the 10 and a half right away fee with no property tax rate increase. This would enable us to fund public safety six PD positions as well as fund that fire pension in one year and then accomplish the class and comp market rate adjustment over three years with the 2% COLA and be able to contribute a little bit to health insurance fund balance as well. One thing we wanted to show you guys is what potential increases to monthly bills would be. At the enterprise workshop, we talked about a 5% increase to stormwater. On the average house, that's about 21 cents a month. The right of way fee, as we discussed earlier, would be set at $15 a month. And then there will be no property tax increase related to a tax rate increase next year. So citizens would see an increase on their monthly bill about $15.21 specifically related to rate increases next year.

Are there any other questions or comments?

We really are looking for direction in this budget and what option you'd like to go, what you'd like to fund for the next fiscal year.

Let's open it up for some comments from the diocese and we'll turn it over to Phillip to let us go from there.

On the PD, are they currently fully staffed? My understanding is they're not, but it would open up those positions to staff them. How many of y'all short right now? 171 on paper, if you will.

We have 179 in some grant funding positions.

Is that including these six, or is this above that? I'm curious if that's... needed to be line item right now or if we need to try to get those filled first before we go on with that. I don't know if the compensation will help that, alleviate that.

And that's one of the goals of the comp and class study is it gets us to a competitive market rate where we're able to fill those positions. We're a little bit more competitive on pay. So that would be the goal with funding those additional PD positions and the comp and class.

Mary, we'll start. We'll just go down the line and go from there. Let's start with you, Mary.

Thanks, Patrick. At the question you were asking, that would fund the six, but what were you saying there, Adam, with 171, 179? Get that sucker on the video.

So right now we're authorized 174 with those six frozen positions.

Okay.

We have five positions that are funded through either the school district or grants, so we can technically hire up to 179. If we had those six back, we could go up to 185. Okay.

Okay, good.

And right now, when I say on paper, we're paying 171 police officers, if you will, but 11 of those are in some form of training, and eight of those don't start a police academy until the end of this month, which lasts, with field training, about nine months.

Would this work for y'all?

it would help. And we're not against even talking about if we could try to help retain our bodies even better, our police officers, by even rolling some of those. It's great to have more bodies, right? But we need to retain our people. In my opinion, that's more important is to retain what we have. So if we could even take some of those frozen positions and roll it into getting closer to market value, the chief is for that.

OK.

Because at the end of the day, we don't want to hemorrhage anymore.

So class and comp is a must, really?

It is. Yes, sir. It's huge. Most definitely, yes. That 16% is alarming.

Yeah. No, that helps. That made my mind go into another tangent there, and maybe this will be a question for when we get past this part, but that 10.5 is going to do more... It'll do just as much as that 12 if we were to switch some numbers in there. But we've got to take care of PD. We've not done that in a while. That gets me for now. Thank you. Awesome.

You all good?

Patrick? Harry?

No questions. I've seen this before. But I will say this comment so that the public knows. We started this process about six months ago. We go through budget hearings every year. And it starts with all the departments going to the department heads and working with the senior staff here. And I say I appreciate the fact that we are almost to where we need to be. But we didn't start this last night. People need to understand that we've been working on it a long time. And I appreciate everything that's gone into this. Jonathan, you have done a great job. I appreciate how you approach this. And your number sense is better than a lot of accountants because you get it from both sides. So thank you. I just want to say work. So the 1.2 is a one time this year, correct?

Yes, sir. That $1.2 million for the fire pension contribution would be a one-time funding. That means we would have some additional capacity in the next year to fund other initiatives as well as maybe go towards funding the second year of the pay plan.

That's even a possibility. If they needed more officers or something, we could even look at pulling that out the next year after we... No, I'm going to agree. It's no tax increase, but I do like the 10.5 of the fee. It's not a tax. It's a fee.

I don't think there's any question class and comp is a must. It's a must. I'm only sorry that it can't be more.

You've kind of heard our direction, Phillip, Jonathan, everybody. But I will commend everybody for we're heading into September with a plan, all right? And we look like we're very close to actually being where we need to be to where September for us sometimes is a juggle point where we're bouncing balls back and forth. I thank everybody. And I want to thank council and staff for getting it together and having it on the board with something we can look at. Phillip, I appreciate your input. My concern here is we've just added a bunch of expenses here and sustainability over three or four years. And I think what I've seen today is we can sustain this because of the right-of-way. It helps us solve a lot of problems with that. I'm excited to see some things come on that we've talked about for two years. I know HR has talked about software. I remember coming in before I was the mayor. Kimberly was like going, I've got to have some software. We're doing things to make it work smoother and better, and I can't attribute that any list. I mean, everybody here has put in their part. They've put in their background work. They've known the material that's come forward, and I can't thank everybody enough for what you've done. We're trying to figure out a way to make it better. There will be a point in time in the future where we'll have some economic development that could make some of these things go away. But for right now, this is pretty much the clearest path for us at this time. And I just want to thank everybody for that. Phillip, I'll throw it to you to close it out.

Yes, Mr. Mayor, I appreciate that. And I'd like to thank the comments that came from the council as it relates to compensation being a priority for staff. Again, that's been something in the short time that I've been here has been one of the most pressing issues that's been addressed with the department directors. And I think that'll go a long way to ensure that we continue to serve the citizens of St. Angelo. As you see in front of you, we do have a tax rate hearing that will take place at the September 1st council meeting. That will be the first reading of the tax rate as well as the budget based on the input that we received today to go forward with the $10.5 million right-of-way use fee. And then that must also have a second reading on September 15th. IN THE EVENT THAT WE DO NOT GET A TAX RATE OR A BUDGET APPROVED AT EITHER OF THOSE MEETINGS, WE WILL THEN HAVE TO CALL SPECIAL MEETINGS GOING FORWARD. SO WHAT I ASK THE COUNCIL IS IF THIS IS NOT THE DIRECTION THAT WE WANT TO GO THAT WE HEAR ABOUT IT NOW SO WE CAN BEGIN TO COME UP WITH ALTERNATIVES TO BE ABLE TO FORMULATE A BUDGET GOING FORWARD. IF YOU GO BACK TO THOSE SLIDES THAT WERE INITIALLY DISCUSSED, DOING NOTHING, WE ARE ALREADY IN THE HOLE. and we would have to come back with some different options for the council. I think not to rehash everything that's been discussed, but this fee is something that will be spread amongst residents, businesses, really anybody that's doing business commercial-wise, any business, any use within the city. And so there are some groups that will be paying that haven't necessarily paid in the past. Again, it's spread across the groups here. I do want to reiterate that not only do you fund priorities within the budget, maybe you mentioned software, class and comp, but you're also maintaining where we're at now as it relates to street work and definitely applaud the street work that's taken place. I know Shane and Patrick have had a big part of that and really defined a program and that's very unusual for cities to have that forward facing of a program for fill coating and things of that nature, but that just shows the initiative to keep roads and other priorities as a forefront. So with that, Mayor, we'll definitely take this as a priority going forward, and we'll be prepared on September 1st to be able to present the next steps and have the hearings. Cool. I'll look for a motion to close the meeting.

Tom, I'd like to say something real quick, though, if you'd give me a chance.

I just want to speak to, it's a small topic when it's compared to humans and our life here and all, but To the many that are watching now with animal services, this is the one department that was kind of singled out. That's been a hard fought. It's been anything to do with animal services is gonna be a lot of emotion there. And that 80,000, that's not a small amount. And a lot of finagling had to go, a lot of give and take to help that program, give them the tools that they need to really succeed. They have been the redheaded stepchild for a long time, but it is such a powerfully felt task and department throughout the San Angelo. I am certainly not putting dogs and cats above human beings, but I I know that mine ranks higher than some humans, but it's not a laughing matter. This has been a difficult road for everybody, and Patrick, I didn't mean to single you out. I'm just, y'all fight to make it work. We fight for the people to get it to work. But I do want to thank you all for that $80,000. That's going to help us go a long way, and primarily so that they can get flea and tick as they come in. That's going to be a very, very big deal. So I really want to thank you all for that. I appreciate it.

Mayor, it's going to be very brief. I know you'll take my microphone away after this. I just wanted to remind those that may be watching online that we are going to have town hall meetings with each council member in their districts. And this will be one of the items that's discussed to give input about the budget, but also show and display what's in the budget as well. And so that way we get out into the community and people understand what's next with the budget as well.

I've got a first to close the meeting. Can I get a second? I think I heard back to you. Got a dip from Patrick for a second. All those in favor of closing this meeting, say aye. Aye. Any opposed? Let's go home.