Budget Committee - Regular Meeting

Thank you. you Bye. Thank you.

Roll call, please. Chair Johnson. Here. Vice Chair Yang. Here. Council Member Bowie.

Here.

Council Member Coleman.

Here.

Council Member Kim.

Here.

Council Member Jones. Here. Council President Naker. Six present, one excused, being Council President Naker. All right, thank you. We are heading into budget season. This is to kick off the first of many different department updates. We'll be starting with the Office of Financial Services. And also, as you may know, in the 2026 budget cycle, we asked for quarterly budget to actuals. So we will also be hearing from OFS regarding quarter two budget to actuals as well today. So I will hand it over to budget manager Madeline Mitchell. Welcome, Ms. Mitchell. Thank you.

Good morning, Chair Johnson, council members. My name is Madeline Mitchell. I'm the city's budget manager, and today I'm going to walk you through the mayor's 2027 proposed budget. We will start with the overall budget picture, including the $26 million general fund gap that you've all heard about, and how the proposed budget closes that gap. Then I'll walk through spending and revenue changes, and then go department by department through the major general fund changes, finish with some special fund investments, and then what the entire proposal means for the typical St. Paul household. There are a lot of individual decisions in this budget, and I won't be able to cover all of them. But I will do my best to focus on the things that are most important for overall understanding of the budget and the choices that are embedded in it. As we go through this, please, of course, feel free to stop me with questions. My team and I are here to help you understand both the financial implications of this proposal and, as we move through the process, the implications of any changes that you may want to consider. Before we start, I'd like to take a moment to recognize and thank the members of the budget team who have worked so hard in preparing this budget. Madi Guerra, Brian George, Shannon Forney, Nichelle Vaca-Woods, Emma Schuster-Mavis, and our finance director, Joe Harney. And I would also like to thank our partners and colleagues in departments. We have a lot of department staff here as well. So thank you to everyone who worked so hard on this budget. At the highest level, the 2027 proposed operating budget is approximately $888 million. This includes a 6.8% property tax levy increase. It funds nearly 3,200 FTEs, and its development was guided by four principles laid out by the mayor's office, promoting long-term fiscal sustainability, strengthening community safety, supporting a thriving business environment, and responding effectively to residents' needs. We'll go through some summary slides in a moment here. But I first want to talk about the 2027 budget environment. As you have all heard before, every year we start the budget process with a gap. And that's because the cost of doing business, of doing the same thing that we did last year under this year's conditions, gets more expensive every year, with increasing wages, health insurance rates, fuel costs, et cetera. Our revenues don't automatically grow to keep pace. So for 2027, our starting budget gap was $26 million, made up of inflationary salary and fringe growth, reabsorbing costs from the ARP phase-off, funding the debt levy, and then covering other increases like utility adjustments and reflecting costs that were added mid-2026 into the 2027 base budget. And that's all before adding any new spending. I'll note here that 74% of this budget gap is driven by employee expenses, which is pretty comparable to the amount of general fund spending on personnel. And for reference, a 1% increase in the property tax levy yields about $2.2 million in revenue for the city. So if we were to close this entire gap with only property tax levies, this would mean a nearly 12% levy increase. When we talk about balancing the budget or closing the budget gap, we have three levers to pull to get that gap to zero. We can either increase the property tax levy, reduce spending, or find new non-property tax revenue. We have control over some of the non-property tax revenue in that we can set rates and fees, but much of it is out of our control. And that is either because it's volume driven or inflationary, or in cases of things like our pension aides and local government aides, It's set by another body. So that really leaves property taxes and spending reductions as our most powerful tools for balancing the budget.

And Ms. Mitchell, we also have a question from Councilmember Bowie. So Councilmember Bowie.

Yes, thank you, Chair Johnson. And thank you, Mitchell. I just have a quick question, just a point of clarity of the last slide here about the debt levy. Can you, just as a point of clarity, can you just define judgment bonds and how those are different from standard obligation bonds?

Yeah, yeah, definitely. Chair Johnson, Council Member Bui, so typically in the budget gap, we see a line for the debt levy. And that is usually that $1.5 million. And that is for just our regular recurring debt obligations that we have every year. Earlier this year, you may remember that we issued a judgment bond to pay for the settlement from a lawsuit that we had. So this is the first of three years that we will need to put money towards that obligation.

Thank you.

OK, so as we think about the levers that we do have that are more easily available to us, that's spending reductions in property taxes. Both of those tools have very real impacts on our community, and they need to be balanced within the greater picture of our goals for the city. These are the tensions that the mayor and her team have grappled with over the course of the preparation of this budget. And these are the same tensions that you all will now take on as you consider changes that you'd like to see in the budget. Here are the very, very high level components of how that $26 million budget gap was closed. The majority of it was covered by the 6.8% levy increase, amounting to around $14.3 million in revenue. The 2027 budget also includes some other inflationary and new growth for non-tax revenues and net department spending reductions. And I really want to emphasize the word net here. The department solutions aren't $2.7 million of cuts. They include the net effect of spending and revenue changes, both increases and decreases across departments. We'll get more into the specifics of each department and what reductions were included in a few slides here. Zooming back out a bit, the 2027 city and library general fund budget is $438 million. This is an increase of about $21 million, or 5%, over 2026. Special funds account for about $394 million, a decrease of 4.2% over 2026. And the debt fund budget is about $55 million, an increase of 1.5% from 2026. As a reminder here, special funds are for situations where revenue has to be directly tied to the expense. So for example, our sewer utility is funded with sewer fees. And grant dollars are typically reserved for very specific things as stipulated in the grant agreements. So separating these types of things into special funds helps us track them and make sure that we are staying in compliance. The largest decrease that we see here in special fund dollars reflects the 2026 spend down of American Rescue Plan dollars and Fund 211 dollars as well. And so then the general fund is basically everything else funded primarily through property taxes and LGA. If we break it down into spending categories, we can see that the vast majority, around 83%, of our general fund expenses are salaries and benefits for our employees. When employee expenses make up that much of the general fund, even relatively small changes in compensation, health costs, and staffing levels can have a pretty significant impact on the budget. If we include special funds in the same graph, that number drops to 52%. And that's because there are more services and capital-related expenses outside of the general fund. But even there, we see that employee expenses make up more than half of our spending. So when we're looking for ways to close a general fund gap, personnel costs are both central to our understanding of the pressure that we're facing and the choices that are available. In the general fund, our two largest departments are police and fire, accounting for nearly half of our general fund expenses. Other large departments include parks at 12.4% of our general fund spending and public works at 10%. Smaller departments, which are primarily internal services like finance, technology, the city attorney's office, make up that 13.5% you see in the yellow pie slice in the column on the right side. If we consider all funds, we see a significant shift here. Public Works is now the largest individual department with 26.7% of total spending. Police and Fire now make up about a quarter of all spending. General government accounts here is the 3.3% in the blue on the bottom of that column. And that's slightly higher than what you'd see in an average year due to the inclusion of some remaining special fund dollars for public safety aid and opioid settlement. And then internal service departments still make up small portions of the overall spending, as you can see on the right side. I'll also just note for OFS here, that number jumped pretty significantly from 1.1% to 7.2%. That is because of the inclusion of both the debt fund, which is primarily housed in OFS, and the fleet services fund, which is also housed in OFS. The 2027 proposed budget funds just under 3,200 FTEs. This is a decrease of 1.6% or 0.05% over 2026. Later this afternoon, we will be emailing council members a more detailed list of all FTE changes. We have the general funds included in this presentation, but we will be getting the list to you all with all changes. So here we have general fund FTE changes by department. So this doesn't include any special fund FTEs. I've broken these changes out into three categories. Additions are new positions. There are 22 positions being added in the general fund this year. Reductions are existing positions that are being eliminated. That total is 32.59. And shifts to and from special funds reflect the movement of existing positions, but not an overall increase or decrease in the city's budget. So a positive number in that column, in the shifts column, means that an existing position was moved from a special fund to the general fund. And most of what we see there are positions moving off of expiring funds like grants or ARP. A negative number in that column means a position was moved from the general fund to a special fund. Overall FTE growth in the general fund was 21.43. But if you back out the employees moving to and from special funds, it is a net decrease of 10.59 in the general fund. Taking a look at revenues, we can see that the city's general fund is primarily supported by property taxes and local government aid. Other taxes include things like the XL franchise fees and our hotel tax. Non-LGA intergovernmental revenue on the general fund side is primarily police and fire pension aids from the state. And then charges for services includes things like our paramedic fees. If we include all funds, Property taxes and LGA support about 35% of our operations. Other taxes on this side now reflect sales tax, and non-LGA intergovernmental on the right side includes state and federal grants. Here's a closer look at our property tax revenue. The 2027 budget includes a total property tax levy of $248 million, 190.5 of that supports the city's general fund. $30 million is levied to pay debt service. $24.5 million supports the public library agency. And $3.26 is levied on behalf of the Port Authority. The total levy growth is 6.8% over 2026. And then just for reference on the side, total market value growth for properties in the city of St. Paul is estimated to be a modest 2.1% for taxes payable in 2027. And they believe Ramsey County is scheduled to come present later this year and they have a lot more detail on values and how they're changing. Turning to the second largest revenue in the general fund, local government aid or LGA. As a reminder, LGA was originally created by the state to stabilize local property taxes and to ensure that basic quality services are available in all Minnesota cities and that they can be maintained from city to city regardless of population size and tax base. Unlike other grants or restricted state and federal aids, LGA is a flexible funding source, which makes it very important for our budget. It's based on a formula that starts with determining a city's revenue need. It includes factors like jobs per capita and age of our housing stock. The formula then backs out what we can generate on our own through our own market values and property taxes. And that leaves us with our unmet need, or what the state formula would say should be funded through LGA. St. Paul has historically and still has the highest unmet need and the largest gap between unmet need and our actual allocation. For 2027, St. Paul's increase in LGA is relatively small, about 352,000. And that's driven primarily by the formula. There were no significant changes to LGA in the legislative session. In addition to property taxes and LGA, we had about $12.9 million in other general fund revenue growth compared to 2026. The biggest driver here is new and inflationary growth from the fire-related revenues. That's about $4.46 million more than 2026. We're also seeing an increase of about $2.7 million in gas and electric franchise fees offset by a reduction of $100,000 in cable franchise fees as customers continue to switch to online streaming services. And that results in that $2.6 million for franchise fees that you see on the third line there. And then we have another $1.8 million in state pension aids for police and fire. There are some small but still meaningful changes, about $500,000 in interest earnings and $880,000 in public works revenues that include additional municipal state aid revenue and an update to a contract that we have with Ramsey County that will bring in about $282,000 more. and then miscellaneous adjustments across the city for another $2.6 million. More detail on these can be found either in the budget book or when departments are in front of you in the coming weeks.

Ms. Mitchell, are we, with some of these items, I know some of them were increases and or new increases choices that either this body has made or just decisions that have been made in the last fiscal year. Could you share just kind of with this slide and just with the revenues, are they on track from the projections that we used in fiscal year 2026? Are they like above the projections? Just kind of wondering how they're performing.

Yeah, absolutely. Chair Johnson, thank you. Some of these are in relation to changes that were actively made. I think the biggest one there is franchise fees. And those are keeping pace with what we'd expect. They are performing at or above projection right now. We can get you some more detailed numbers on that. But I did check the other day, and it is performing well. So that's good news. And then paramedic fees is another one that we've looked at in recent years that also continues to perform well. So we feel fairly confident that these increased projections are manageable.

Yeah, I think it would be just helpful for us just fiscal year 2026 is slightly as a blur. And just thinking about the projections that we all had placed there and just the numbers that were reflected, it would be great to just see that in comparison. Yeah, absolutely. What we thought we would get versus what we actually got. Yes, thank you.

Before I get into individual departments, I want to spend a minute explaining how we got from the $26 million budget gap to the proposals that you're going to see on the next several slides. The mayor asked departments to come forward with proposals in three different areas. The first was reductions. Departments were asked to identify reductions equal to 4% of their 2026 adopted general fund budget. That was a target for the proposals, meant to create a menu of options for the mayor. It was not necessarily a direction to cut exactly 4% from each department's budget. To meet reduction targets, departments could either reduce spending or propose new revenue. Inflationary revenue was counted centrally to help buy down the overall gap, but revenue resulting from a change in operations could be counted towards a department target. The second category was existing costs that are currently unbudgeted. In other words, things that departments know that they need to pay for, but are maybe not and necessarily adequately reflected in the 2026 budget. And the third was optimal operations. Departments were asked to think about what they would need to operate really well, and not just what they need to maintain the status quo, but what would allow them to operate most effectively. So the budget that you're going to see in the next several slides is a mix of all three of these. As we go through each department, I'll try to distinguish between reductions, base budget inflation, previously unbudgeted costs, new revenues, and investments. I'm hopeful that this gives you a more accurate picture of what is actually changing beyond whether a department's budget just went up or down. Starting with the city attorney's office, the reduction target for the city attorney was $463,000, and the proposal counts about $294,000 towards that target. That includes eliminating a vacant paralegal one, underfilling a senior attorney position, and reducing the court costs and professional services budgets. There are about 556,000 of additions to the city attorney's budget, including two data practice specialists, a civil division attorney, and investments in e-discovery, VPN, virtual private network licenses, a digital evidence and case collaboration software. There's also a half FTE shift associated with the familiar faces program as grant funding expires. So half of that position is being shifted to the general fund. The city council budget, as you all run your own budget process, we don't have a reduction target for you here. The primary change is the normal base budget adjustments for inflationary salary and benefit costs, along with a $50,000 reallocation moving HRA audit committee funding from the general fund to the council special projects fund. So the proposed general fund budget increases the council budget from about $4.85 million to $5.18 million. DSI's reduction target was about 1.04 million, with about 454,000 counted towards that target. I will acknowledge that this slide is a little confusing because of the timing of some of these changes. So the base budget, that second line that you see, reflected an increase of three FTEs. for tenant protections. As you may recall, these were approved earlier this year, so they weren't reflected in the 2026 adopted budget when it was passed in December. So the first thing that we did in the base budget for 2027 was add those positions. Then later, in the mayor's phase of the budget process, two of those three positions were removed, resulting in a net increase over 2026 of one FTE instead of the three added in 2026, so plus three, minus two. These reductions also include eliminating a vacant Inspector 1 position and a half-time customer service representative and converting a vacancy to a lower classification. All of these position reductions will be achieved by not backfilling positions when someone either quits or retires. There's also a significant realignment here, about $1.1 million in spending and revenue to more accurately budget and reflect summary abatement work. The proposed emergency management budget is about $7.1 million. And I'll just note here that most of that, about $5.8 million, is the city's JPA with Ramsey County for our 911 dispatch services. So that was taken out of the calculations for emergency management's reduction targets. Emergency management had a $50,000 reduction target with $40,000 counted towards that. The reduction is primarily a $40,000 decrease associated with siren maintenance and moving some travel, training, and services to grant funds. The department also had about $338,000 of base budget adjustments, and that includes inflationary growth for employees, but also updated dispatch service charges, which I think our cost for that went up about $250,000. The Office of Financial Services reduction target was $205,000, and the proposed budget counts the full $205,000 towards that target. Those reductions are primarily miscellaneous non-personnel reductions and then shifting part of our fleet manager to the Fleet Services Fund. OFS is also adding a payroll accountant, and that position is actually moving from former ARP-supported projects fund in Fund 211 into the general fund. And then the $155,000 you see at the bottom there is for events and festivals. That's being shifted from the Office of Financial Services to the police department. And that's a reallocation rather than a reduction. It will also appear on the police department slide. FHIR is one of the larger, more consequential department budgets, so I want to spend a little more time here. I have two slides for this one. The FHIR department's 4% reduction target was about $3.38 million, and about $2.45 million is counted towards that target. On the spending side, the proposal includes about $879,000 of reductions. That includes eliminating the CARES division, reducing two deputy chief positions to captain, and eliminating one service worker position. Budget also assumes about $1.57 million of additional revenue, primarily through new and increased EMS-related fees. And there are also several reallocations, bringing three EMS positions back to the general fund as public safety aid expires, and adding funding for vehicle repairs to EMS academies and extrication equipment. The largest individual reduction in the fire department is the elimination of the CARES division, which represents about 720,000. Importantly, this proposal assumes that this is achieved through attrition, with the existing employees reassigned rather than laying off those employees. It is also my understanding that the department plans to embed the work of the CARES team in all aspects of response, rather than just one dedicated team. But the fire department can certainly speak to that more when they come before you in a few weeks. There is another roughly 106,000 reductions from reducing two deputy chief positions to fire captain, and about 53,000 from eliminating a service worker position after the first quarter. On the investment side, the proposal brings approximately 595,000 of EMS chief positions back into the general fund as public safety aid expires. It also adds 500,000 for vehicle parts and repair, 300,000 to fund two EMS academies, and $100,000 for that extrication equipment. And then there's also a $1.5 million attrition adjustment that offsets some of those costs. So that's why we're talking about it as a reallocation. So when we talk about the fire department's reductions overall, I would say maybe the more complete story is that the department is absorbing reductions while also redirecting resources towards EMS capacity training and fleet maintenance. HR has a 4% reduction target of $273,000, and the full amount is counted towards that target. The reduction includes a reorganization that eliminates an HR manager and management assistant three position. It makes adjustments to vacant positions, changes classifications, and includes some other non-personnel reductions. The department also adds an HR liaison coordinator and a workers' compensation analyst. There is also a significant funding shift here. 4.25% of our FTE of our benefit staff are moving out of the general fund into the benefits administration fund. And that is funded through a fee collected in our health insurance rates. So the general fund budget for HR decreases. from $6.8 million to $6.6 million. But that doesn't mean that the department budget is being reduced entirely. It means that a good chunk of that is that shift of those FTEs to a special fund. So they will remain just budgeted in a different place. And my apologies here. There is a typo on this slide. It should say that HERO has a $180,000 reduction. with about 220,000 counted towards that target. The reductions are primarily the elimination of two vacant positions, a compliance coordinator and a labor standards investigator one. There is also a half-time HR investigator position moving from expiring HUD funding into the general fund, along with a small increase to the PC-ARC stipend. The result is a proposed general fund budget of 4.65 million and 30 FTEs for HERO. The library's proposed budget is about $24.6 million, a slight increase over 2026. The library score reduction target was $938,000, and the proposal counts $302,000 towards that target. There is just over $1 million of inflationary growth and $404,000 of additions. The inflationary growth there is primarily the property tax amount that is added to fund library services. And then the additions, there are primarily library safety specialists and visit counters. I have more on this in the next slide. There are also some funding changes in that base budget amount associated with the expiration of temporary resources. That's the removal of one-time cultural star dollars that were added for library materials in 2026. And then in Also included in reductions is the shift of some material costs to the library's special projects fund, where new revenue for black and white printing, notary services, and photography at George Latimer Central Library will support those costs. So the most significant policy change here is the proposed closure of the Dayton's Bluff Library. That would represent about $270,000 in general fund savings, including eliminating the metro state lease. reducing technology and materials costs, and eliminating 1.3 FTEs through attrition. All of those existing employees will be reassigned, and the vacancies held as they become available.

And Ms. Mitchell, just to clarify, are there any other cuts to library hours or library staff or other library facilities besides Dayton's Bluff?

Chair Johnson, no.

Okay, thank you.

The library budget also includes sustainable funding for a portion of the library specialists that were added with one-time money in past years. This work started as a pilot and has become essential to library operations. Three FTEs are funded on an ongoing basis and one on a one-time basis in the general fund. Two will continue to be funded with unspent library optimal response dollars in fund 211. And one is funded with a grant until 2029. OFS is working closely with the library team to make sure that these critical positions are funded, that we have a plan for funding those going forward as well. Also added is one-time funding for visit counters at all libraries. Right now, tracking this information is a very manual process, so this will help library staff collect better usage data based on visits instead of circulation.

I see a question from Council Member Jost.

Thank you, Chair Johnson. Thank you, Ms. Mitchell. I have a question about the library fund balance. It's my understanding the library has its own fund balance and it's approximately $8 million. Could you share with us or maybe follow up with us on the exact amount that's currently in the fund balance and as well as what type of options there might be for utilizing some of those dollars in a way that would not impact the AAA bond rating for the city?

Chair Johnson, Councilmember Jones, yes, we can absolutely follow up. I don't have that number with me today, but I know it's been something that we've been looking into in the past couple weeks, so we will follow up. Okay, thank you. Thank you.

And along that vein, can you just share a little bit about why we keep an $8 million fund balance in the library budget every year that is unspent, that carries year after year?

Chair Johnson, so the library's fund balance and the city's general fund balance, for the purpose of the rating agencies, are treated as one whole fund balance. We have a fund balance policy at the city that we need to maintain at least 15% of the city's general fund budget in our fund balance. So the library contributes to that overall percentage. So we work to not spend below that amount.

And what is the 15% actually equal to of the city general fund? How much money is needed from the 15% to stay in the fund balance? And how much of the library actually makes up that 15%?

Chair Johnson, I don't have those numbers for you today, but we will definitely follow up with that.

Yeah, I think that would be a really helpful point, just because I think it would be great to know how much from the City General Fund we actually place in that 15%, and then how much we rely on the library's $8 million to contribute to that 15%. I see another follow-up question from Chair Jost.

Thank you, Chair. Just a comment. I first want to just clarify that the while the $8 million in the fund balance for the library is part of the overall general fund balance that we use for the AAA bond rating, it's my understanding that $8 million can only be used for the library. I want to add that $8 million is about 30% of the library budget, We know that the library is not 30% of the overall budget, so I look forward to the numbers that Chair Johnson just asked about, but just to give you folks an idea that it's disproportional to the overall contribution of other departments to the fund balance. Thank you.

And then just as a follow-up, and it may not be, this might just be something for the library director, who I also see in the audience, because I don't necessarily know if Ms. Mitchell will be able to answer it, but from the visitors' counters piece for the better usage of data, could you just share a little bit about, is that equipment, or is that, what is that line item?

Chair Johnson and Director Hartman, you can correct me if I'm wrong. But my understanding is that is equipment. And right now, it's a very manual process that employees have to manually email that number to a central place every day. And this will be an automatic gate counter to track everybody coming in. Because we know that not everybody who comes to the library to use library services is checking out books. And it's not necessarily registering as collections data. Anything else?

Welcome up, Director Hartman.

Thank you, Chair Johnson. I just want to clarify when we say track, we don't mean like track what they're doing. Right now it is a manual process and the investment we're looking to make is one that is real time so that we would be able to keep data on a centralized basis of what hours are busiest in each of our locations. and what days of the week, which will help us make good choices and good decisions about hours as well as staffing.

Okay. And then, Director Hartman, how many library specialists do we have on staff currently?

Chair Johnson, we have seven library safety specialists on staff.

Okay. And then, just to clarify, the data, the way that we collect data right now around visits and circulation data is strictly manual.

Chair Johnson, we have counters on the doors, but we report that data manually to a central location, so we don't have it in real time.

Okay, thank you.

All right. Moving on to the mayor's office, the mayor's office had a 4% reduction target of $97,000, and the full amount is counted towards that target. Those reductions include a $19,000 reduction in the mayor's compensation, $22,000 in leadership foregoing COLAs, the top three highest paid staff in the mayor's office foregoing COLAs in 2027, and a $56,000 reduction in lobbying contracts. At the same time, the proposal adds one assistant to the mayor one position at about $113,000.

Just a quick clarification. So the addition of the assistant to the mayor, that's not the climate director, correct?

Chair Johnson, correct.

And where is the climate director housed?

The climate director is housed in the Office of Financial Services, and that is paid for out of a special fund that is supported with gas and electric franchise fee revenue. I do have it on a slide later so we can get into it more.

OK, wonderful.

Thank you. The Parks Department had a reduction target of $2.1 million, with about $188,000 counted towards that target in the proposed budget. The reductions affect rec center hours and programming. And that means reduced indoor programming at Highwood, elimination of morning hours at Edgecom, reductions in morning hours at non-hub centers, and closing non-hubs on holidays. The department also adds about $1 million, and that includes ongoing general fund support for Right Track and Sprockets as temporary funding for those programs expires, along with a one-time investment in safety technology. The proposed budget also makes targeted reductions in rec centers while also sustaining programs that are losing funding. So a little bit more detail on those parks changes. The $75,000 net reduction in indoor programming at Highwood comes from reducing the lease. That is about $100,000, and that's offset by a $25,000 investment retained for ad hoc indoor programming, so shifting to a more permit permit-based approach there. There are reductions, as mentioned, in morning hours at Edgecombe and non-hub rec centers. And non-hubs would be closed on holidays. For reference, the hub rec centers are Arlington Hills, Frogtown, North End, Highland, and Jimmy Lee Oxford.

So every other rec center that's not those. Yes. Can you repeat the hub rec centers again?

Chair Johnson, yes. Hubs are Arlington Hills, Frogtown, North End, Highland, and Oxford.

Would we also just be able to understand the actual elimination of hours and the reductions per non-hub rec center?

Chair Johnson, yes. We can get the specifics to you after this meeting, and I'm sure Director Rodriguez will also speak to it in his presentation.

And can you just also specify just why, like, we don't see Duluth in case on this list, just because I know that Duluth in case is also set to be projected for closure for next year. Could you just share why it's not maybe listed in the reductions?

Chair Johnson, yes. So Duluth in case, there is no budget impact for that. There was no change happening. So any closure that may be coming there, staff would be reassigned elsewhere, so no impact to the 2027 budget.

Okay, so there's no financial positive or negative impact to closing the rec center? Chair Johnson, yes. Okay, thank you. Chair Jost.

Thanks, Chair Johnson. I just have a comment. Ms. Mitchell, I'm sure the Parks Director will confirm this, but it's my understanding that the Elimination of the morning hours at Edgecombe rec center means that that rec center would open at 2 o'clock instead of 9 o'clock and the reduction in hub hours are opening at 10 a.m. Instead of 9 and for the locations that have libraries which would be Arlington Hills and Highland that aligns with the time the library opens which is which is 10 a.m.

Chair Johnson council rejects that sounds correct I OK, parks budget also includes about $211,000 of one-time safety technology funding. And that is based on recommendations from the parks safety audit. And then, as mentioned, it moves right track and sprockets into sustainable general fund funding as funding for those programs expires. So that's about $558,000 for right track and $243,000 for sprockets. PED operations are primarily budgeted in a special fund. So they have a relatively small 4% reduction target of $35,000, and the full amount is counted towards that target. The reduction is miscellaneous non-personnel reductions that will happen through the reduction of an administrative fee that goes from the general fund to the PED administration fund. There is also a $1.7 million reallocation here. And that's just moving the district council budget from a general government account into the PED budget. And that's just for ease of administration, so not an overall increase in the budget for that, just shifting where it's budgeted. The police department is one of the largest general fund budgets. So this is another slide that I actually have two slides for. The police department's 4% budget reduction target was $4.9 million, and about $2.7 million is counted towards that target. The next slide breaks those pieces out, so I'll just share the high level here. The police budget starts with... significant base budget growth, primarily from inflationary salary and benefit costs. And the base budget growth also includes the return of four FTEs from the COPS grant to the general fund. The proposed reductions include 13 positions. And then there's also $2 million increase for police academies and associated trainee costs. And that's offset by an attrition adjustment of about $2 million. And then also the budget funds. some additional costs that are from that category, that unbudgeted category that we talked about earlier, where we have costs that exist and do not have adequate funding in the budget for it. So a little more detail here. The largest individual reductions are the seven sergeant positions at $1.4 million and four commander positions at $971,000. There are also reductions associated with the crime prevention coordinator and the physical fitness coordinator. And then on the other side, a reallocation of about $2 million for police academies. That includes funding for nine FTEs, police trainees, representing 29 headcount, along with equipment, uniforms, and examinations. My understanding is that is essentially funding for one and a half police academies. And that is all offset by $2 million of attrition savings to reflect the fact that we have not Been able to hire up to full strength for several years now. And then there is the $155,000 currently budgeted in OFS for events and festivals, and that's just moving into the police department because that's where the associated spending has been happening.

I see a question from Council Member Kim.

Thank you. I have a question about existing vehicle repair and fuel costs. I saw in the fire budget they have additional vehicle parts and repair but not fuel costs, and I'm wondering if... like how those might be connected to like the take-home vehicle and the gas and transportation. Would you mind looking into like how much of that budget is connected to take-home vehicles? I'd be interested in it for both fire and police. And maybe it's a little rhetorical, but just wondering why it is being included in police budget in this manner and not in fire. I wonder what considerations are being made that's different there.

Chair Johnson, Councilmember Kim, we can definitely look into that. Thank you. I think that probably it's more vehicle costs as a bucket and not necessarily strictly fuel repair parts. So I would kind of classify both of those as the same as just general support for vehicles.

Okay. And I guess as a follow-up, I just am wondering, you know, I noticed as we go through, there's the 4% reduction target and there's the counted towards target. And they vary greatly in some departments. So like some departments are right on target, above target in some cases, and then some are significantly under. Could you share a little bit about like

what went into just thinking like it seems like there was a four percent reduction target but then what actually was given in some cases could be millions plus lower um sure uh chair johnson yes um so as as mentioned the reduction targets were meant to sort of create a menu of options for the mayor and then once all of those were assembled it was the job of the mayor and her team to assess uh and sort of prioritize across the city how we would get to close our 26 million. So there were cuts that were included that were more manageable than others. And so that's some places where you see, like I'll use our department, OFS, as an example. We felt that we could comfortably take reductions without majorly impacting our operations. So that was a place where the full cut was taken. There were other examples where cuts would mean layoffs of frontline staff, and so those were avoided, and it all sort of just depended on what each department had available in their operations.

Okay, and then I have a question from Chair Joost, and then back to Councilmember Kemp.

Thanks, Chair Johnson. Ms. Mitchell, could you explain a little bit more around the elimination of the commander and the sergeant positions? It's my understanding that when these positions are being eliminated that we're not laying anyone off, that they're being demoted to a lower position. So does that basically mean that since we're not laying people off, that by demoting a commander That looks like that's about $240,000 per commander that would be demoted. Am I understanding that correctly?

Chair Johnson, Councilmember Jost, I would leave it to the police department to speak specifically about how these will be achieved. But my understanding is also that it will not be layoffs and that it will be, I think, primarily first through natural retirements and other separations. And then I think after that, I would want the police department to speak on how the remainder are achieved there.

Okay, I think, yeah, Chair, I would appreciate that because trying to understand the $240,000 reduction per commander and also for sergeant, I mean, we're looking at like $200,000 per sergeant. I would want to understand how that works exactly.

Council Member Joseph, we can certainly follow up. I think my overall understanding is is aligned with yours, that they will not be layoffs. But we'll definitely get you more details.

OK, thank you. And is the $155,000, just for the sake of the reallocation and connecting the dots, is that an additional $155,000 being allocated in fiscal year 2027? Or are you counting the $155,000 that was reallocated in 26 as carryover?

Chair Johnson, that is the existing amount. So it was a $150,000 ongoing amount so that it had been budgeted in OFS and it's just moving. It's not a new allocation.

Okay. And so just from a budgeting standpoint, but they are targeting against that $155,000 currently, right? I believe so. So it won't be the full $155,000 from fiscal year 2027 that's being reallocated? No.

Chair Johnson, it's an ongoing allocation, so they get $155,000 every year. So they're charging against the $155,000 in 2026, and there's a new $155,000 that will continue, or that $155,000 continues every year.

Okay, so there will be a new $155,000 starting point that they'll charge against next year?

Yes, but it's not an increase over 2026.

Yes, okay, thank you. Council Member Kim.

I have another question about cars. Can you just let us know what the new vehicle budget is for both fire and police, and specific to, I think, the senior command staff or senior-level staff? So interested in what the new vehicle budget looks like. And then I'm wondering about what the current budgeted overtime budget is for police. I remember last year, or two years ago, we took a pretty strong look at it, and they were able to sort of I think, adopt a new shift that helped alleviate some of the overtime costs. And if I recall correctly, they came back and reported that they had already seen reductions in their overtime costs, so just would be interested in how the new sort of staffing model has been successful and whether or not there's an adjustment then in their overtime budget, recognizing that they made, I think, creative and significant shifts to that staffing. The one that I'm interested in, and I don't know if it's necessarily, I mean it's budget related, but I don't know how much the budget controls this, but time and time again police have come forward to present to us and talked about how even if we were to host police academies that we really struggle to then hire them. And so I'm wondering really specifically to see a $2 million budget that's going towards police academies. We have been historically under our sworn strength, which is, as we've talked about here before, sort of a made-up number, both for fire and police, but of course it's adjusted, or it's considered in connection to our population size, which I think is important, but it's just a name that they've come and presented to say that they're unable to train, so we end up training all these folks that don't end up getting hired in our department. So I'd be really interested in how this is guaranteeing additional headcount for our department when we've been struggling for hiring and in fact I think have a pretty high attrition rate both from retirees because I think specifically Air Force might be a little bit more experienced and then in addition to it I had heard around our wages or what we pay not being as competitive as other areas. So we just generally across the board struggle to hire. So I just would be interested as a follow-up, sort of like what does that recruitment look like? We're going to be spending so much money and training folks that may not actually end up coming to work for the city of St. Paul. So I think there's like a bang for the buck question there for me. So hopefully, Madeline, if you're willing to make that a much more articulate question, I'd appreciate it. But there's, yeah, thank you.

Chair Johnson, Councilmember Kim, I took some notes here. We will definitely follow up. I will leave it to the police department to speak to the academy and the hiring piece of that. And then I took some notes here that we will follow up with specifics on overtime and vehicle budgets.

And for clarity, Ms. Mitchell, the $2 million, that's the cost for what it would take to do 1.5, so one and a half police academies?

Chair Johnson, yes. I am curious a little bit about what is a half academy. Chair Johnson, the assumption here is that the department's existing budget can cover the other half. So I think it would be two in total.

Thank you. Chair Bowie.

Thank you, Chair Johnson. I just have a question while we're on police, specifically around the $155K allocation for events and festivals. It's my understanding that that was just a credit fund that we, once a the police department bills event for providing officers there, that they're just using that $155,000 to offset the cost of what their personnel costs, the salary. But they're still getting paid. So I'm just wondering, this is one of those budget items that kind of cancels itself out. I'm just kind of curious if there's any additional costs aside from just the personnel cost for management, or if the 155K is also supporting an FTE to actually manage this.

Chair Johnson and Councilmember Bui, my understanding is that the $155,000 is intended to reduce the cost for the event holder, but I think we can follow up with specifics about how that has been used so far this year.

Yeah, and I think it would be really helpful, because when we talk about reducing the costs, these are costs that police officers are already occurring just through their day-to-day job. It would be helpful to know if them working at an event is a different budget item, and if there's a special unit, and if there's a special FTE, or if that's just the chief who's managing that.

Chair Johnson, council member, yeah, we will follow up with the police and make sure they have that for their presentation. All right. Public Works. Public Works has a 4% reduction target of about $1.8 million, with about $1.68 million counted towards that target. The largest general fund spending reduction here is $800,000 coming from eliminating the alley pilot program and reducing sidewalk support that is typically transferred to the capital budget. I know the Public Works team is exploring some new and innovative options for our sidewalk funding going forward. The budget also restores $319,000 of a one-time reduction to the mill and overlay budget. That was included in the 2026 budget, so that $319,000 is back in 2027. There are also two positions moving into the general fund from the right-of-way maintenance fund and about $882,000 of additional revenue. I talked about this earlier. That's from municipal state aid and an updated Ramsey County agreement.

And just along this vein, in the $800,000 for reduction, when it says eliminate alley program, does that mean that that program is discontinuing? Chair Johnson, yes. OK. Chair Bowie.

Thank you. Just on that, I'm just a little curious if you can give me the short version of the alley program and also with the reduction for the sidewalk support. Can you share, does that look like like staff or materials to actually fix or restore sidewalks. I just want to just make sure that we're still seeing, even with these reductions, we're not seeing a reduction in servicing our sidewalks.

Chair Johnson, Councilmember Bui, I do not believe that there is any staff reduction here. I think this is materials and supplies, but I want to confirm that with Public Works for both of those items. I know the alley program was relatively new. I think in the last couple of years it was a pilot program. And then the sidewalk support, as I mentioned, I know they are exploring other financing options for that. I don't have the numbers today on how that impacts existing sidewalk maintenance. So we'll get that for you from Director Barber.

Okay, and I think it would be helpful just to follow up on the side, or not the sidewalk, but the alley program, just like how well that pilot actually performed. If they had some challenges with spending down those dollars, I would like to know that. I don't recall learning about that during our other presentations.

Okay. Okay. And then our last department here, the Office of Technology and Communications, their 4% reduction target was 487,000, with about 457,000 counted towards that target. The reductions here include eliminating two vacant positions, reducing support for website support, and then other non-personnel reductions. At the same time here, three GIS positions are moving from Public Works to OTC. That's a budget-neutral change. And then the department is also receiving $100,000 of one-time funding to implement some of the recommendations that came out of the after-action review of last year's cyber incident. So we've now gone through the major general fund changes. I want to shift briefly to the special fund activity because there are some important investments here that don't show up on the general fund slides. The first is the former ARP-supported projects in Fund 211. So as you all know, the original plan was for these projects to sunset in 2026. And the 2027 base budgets removed those projects accordingly. So we started assuming that all of those projects were at zero. And then the mayor made decisions to add back funding that was unspent for the departments shown here. So some departments anticipated that they would not be able to fully spend down their funds by the end of 2026. And they made requests to the mayor to carry those budgets forward. for use in 2027, and the bulk of this list represents those carry-forward funds. There are a couple of exceptions here, and those are examples of remaining funds from one project being repurposed for another. Most notably, $250,000 from the OFS electronic payments plan was identified as not being needed to continue that work. And then with the general fund support for Library Optimal Response, they were able to reduce $50,000 of their project. So that $250,000 from electronic payments and $50,000 from Library Optimal Response is being redirected to Public Works Enterprise Asset Management System, to that project, to support the revenue collection system as part of that project. And additionally, PED is proposing to repurpose their 30% AMI administration funding, $200,000 of that, to be used for healthy homes.

Okay, so I just want to make sure that I kind of understand the last bullet point a little bit more. Can you just, could you share that, maybe in a little bit different way, I think, so I can understand. So the library optimal response, there's $50,000 from the library optimal response being reallocated to the Department of Public Works from this $204,000 or...

Chair Johnson, no, this is the end result. So this is what is budgeted now for 2027. If we were not to do those reallocations, you would see library optimal response at $254,000 here, if that makes sense.

So the library as a department is giving up $50,000 of their special funding to support public works project that's here.

Chair Johnson, yes. I think it could be interpreted in different ways, just given the way that we started the process of eliminating all budgets and pooling that. It was that $205,000 of the overall unspent pot in Fund 211 was allocated back to libraries and to Public Works.

All right, thank you. I'm going to let her finish her slides just from a quick time standpoint. We're at about 11. I do want to get to the budget to actuals piece, too. So I'll have you finish your presentation, and then I'll take Vice Chair Yang's question, and then I'll go over to Chair Bowie.

Okay. Some other special fund changes. First, the local affordable housing aid fund anticipates $6 million in 2027 allocations, and spending for that is $2 million for down payment assistance, $1 million for emergency rental assistance, $1.5 million for small-scale development and gap subsidies, and another $1.5 million for other affordable housing programming. And I will say that this amount here is strictly the 2027 allocation. Any carry-forward from unspent projects in prior years is not reflected here and may be reflected in the 2027 adopted budget as we have more information on how those funds are being spent down. Second, there are technology investments, including funding for the payroll system, benefits system implementation, and a virtual chief information security officer. Those are funded in our innovation technology fund and that benefits administration fund that also supports our benefits administration staff. And finally on this slide, there is the new deferred maintenance fund, which is coordinated through the Office of Financial Services and funded with the property tax levy. This was a feature of the mayor's address. The proposed 2027 funding is $1.1 million, and that includes about $268,000 for two FTEs to manage the program and about $871,000 for building improvements and repair. I think this fund is worth emphasizing because it represents a shift towards having a dedicated and ongoing mechanism for addressing the city's facility backlog rather than treating individual repairs as one-off decisions. So while the program funding is only $1.1 million, the staff added will integrate with the existing capital and deferred maintenance work that happens elsewhere and play a role in the city's overall strategy for long-term capital asset planning. Couple more special funds to note. First, the police impound lot has had its fees unchanged since 2011. And the proposed budget increases the administrative fee from $80 to $120 and the storage fee from $15 to $25. And the intent here is to improve the financial health of that fund and align fees more with the actual cost of service there. The second piece here is the Climate Initiatives Fund, which is funded through gas and electric franchise fees. This proposal includes $195,000 for a climate director position that will be housed in the Office of Financial Services, $140,000 for a climate infrastructure and response fund, $140,000 for the EV and EV spot network, and $25,000 for climate-related subscriptions and memberships. I should say this will be coordinated through the Office of Financial Services, but I know that the current staff we have working on climate is deeply connected with climate staff across the city. So it will be a multi-department effort there. And then also for climate, there is $500,000 for healthy homes funded through the Housing Trust Fund in the HRA. And finally, to wrap that all up, this is what we estimate the impact of all these changes to be on a typical home. The medium home value for 2027 is $290,000. This home would see an increase of $58 in city property taxes, a $41 increase in sanitary sewer charges, $15 increase in storm sewer charges, $8 increase in the recycling fee, $7 increase in the trash fee, and a $35 increase to the water bill. Though I will say the sewer, recycling, and trash fees are tentative projected rates. Public Works will be in front of you in a few weeks to discuss these fees in much more detail. The total impact of all of these charges is a net increase of $174 over 2026. As we close out this presentation, I did want to include this slide because it puts the proposed budget in context of the priorities that the council previously identified. I am very certain that we can all find points of disagreement between council priorities and what's included in the mayor's budget, but I also really wanted to highlight a few places where I do think there is alignment. This proposal maintains local affordable housing aid investments. It includes a business services team. related to commercial vitality and economic growth. There is approximately $1 million associated with climate resilience and sustainable infrastructure. On overtime pressures, the proposal includes about $2 million for the police academies and $300,000 for the EMS academies to get more staff in the door to reduce overtime, along with maintaining the fire F shift that was mentioned earlier. We didn't talk about that today, but that has been a successful pilot for the fire department. The library safety specialists are maintained, including three ongoing general fund positions and additional temporary or grant-supported positions. The proposal also restores one-time mill and overlay reductions, maintains right track in the general fund as ARP funding expires, and establishes the $1.1 million deferred maintenance investment. So as we move through the council process, you all will have the opportunity to evaluate all of these choices and consider whether the proposed allocation is where you want to land. That brings us to the end. I hope this presentation has given you a clear picture of what is included in the mayor's proposed budget, how the $26 million budget gap is being addressed, and where the major choices are within this proposal. There are a lot of individual decisions here, and I don't expect that everyone will agree with every one of them. And I think that's a normal and very healthy part of this process. So what I do want for you all is that you feel confident and comfortable understanding the financial framework that we're working within, what's driving those costs, where revenues are coming from, where reductions are being proposed, and where the budget is making targeted investments. And my job and the job of my team is to make sure you have a clear understanding of those numbers and the consequences of the choices in front of you so that you can make the policy decisions that are ultimately yours to make. So with that, I will thank you for your time today and stand for any additional questions.

Thank you, Ms. Mitchell. I saw Council Vice President Yang's hand, and then we're going to go over to Chair Bowie and then Chair Jones.

Thank you, Chair Johnson. That was a lot of information. So I want to say thank you for this presentation and to all of the staff, everybody really involved in putting together the budget materials here. I'll do what I call a brain dump, which is when I am digesting information like this, it often falls into different categories. For example, what do I support? What do I not support? What do I need more information about? And I believe you all will see that reflected in the questions or comments that I bring up here. So what is easier for me is just to run through the slides here. On slide 17, I do want to point out that my understanding is that this doesn't reflect any sort of new revenue that could come in from the early decertification of TIP districts. And I do want my colleagues to know that we've been getting quite a bit of information about possibly decertifying more TIF districts by the end of the year. I'm really glad to see the presentation for this come up in HRA on the 26th of this month and wanted to share that I'm very supportive of us decertifying all of the TIF districts that we can for this year. That's really similar to what we did last year. We saw revenue coming at the last minute and that was how we were able to figure out a bunch of budget resolves from last year. And I think it's just really important to make sure that more of those properties and TIF districts are being put back onto the tax rolls to alleviate the tax burden for our residents. And so for slide 19 about the city council, I understand why a budget reduction target wasn't asked of us. I understand it's also very, you know, it's very political. I do feel strongly that it's important for the council to analyze our own budget and figure out where we can have more efficiencies within using our dollars and also just, you know, figure out like what are the, even the budget to actuals for our office as well because if we can do that, it can, possibly even free up some dollars to add more staffing to our capacity and I feel really strongly about making sure that we do add on more staff to support our current staff and also be able to pursue many of the goals and ambitions that we have long term within the council here. In 424, I'm very concerned about just what happens if we were to eliminate the CARES team. This is a team that we fought very hard to fund and preserve from last year. To me, what's missing is really understanding the county's role in this and even the state, too. What is the long-term vision for this? I have shared to the mayor and her staff that if we were to ever eliminate the CARES team, I feel strongly there should be a phase out for it because it shouldn't just be that the city of St. Paul is all of a sudden disbanding this team and we're leaving it up to our partners to do the work that this team did. Maybe there's a lot for me to still understand there about what the overall plan is. So it's still very unclear to me what that is and I would like to get more information about that. I am really glad to see that positions within the CARES team, we're making sure that, well, the mayor has made sure that those people are positioned into other positions and responsibilities because I want to make sure that none of those staff are laid off, and that's something really important to me. I have a question about slide 26 about the hero department. So we've been without a director for quite a while now, and I know it probably isn't going to get filled this year. to me it's very unlikely that it would get filled, maybe even the first quarter of next year too. So in general, my question about vacancies is, has OFS adjusted the line item for these positions at all to make sure that the projected expense for it for next year actually reflects when we want to hire for that position? If not, that's something really important to me that does happen.

Chair Johnson, Councilmember Yang, the budget right now assumes that that position is filled for all of 2027. So there has been no adjustment made for that.

OK, well, that's very unrealistic. I mean, just even seeing how the fire selection committee has played out in the process in which the council has to assemble a committee to review applications, I know that it takes a lot of time and attention being put behind it. Again, it's just very, to me, unlikely that, I mean, it's hard for me to see that that position would be filled as of January 1 next year. There's definitely a couple of departments that fall into the I am not supportive of these cuts. I mean, I've said to my colleagues at the table here many times, if we don't If we are not funding our libraries, our parks and rec centers at all, we can't depend on other government entities to do that for us. It's our responsibility. And so to me, I think there are some really great proposals in the budget proposal here. Also, there are some very terrible ones that would have very negative impacts especially in areas of concentrated poverty and so in libraries for sure you know like the the cuts in hours there even the closure of let me see here i just want to make sure i'm on the right slide here i'm on slide i'm on slide 28 closure of the dayton's bluff library And I mentioned the potential cuts to libraries. I mean, this is the same situation that I was put in last year when there were proposed cuts to the Arlington Hills Library. I was very opposed to it, and I want to say thank you to all of my colleagues at the table who also were strong proponents of ensuring that we didn't cut any library hours at all. These are, again, many of these cuts are proposed for areas of concentrated poverty where we know Many of the families there are already experiencing disparities across economics, health disparities. I mean, during the pandemic and just in many different crises, thank goodness we had these sort of resources available through the city because it was a way in which we were able to be a safety net for our communities. And so I'm very opposed to overall any sort of closures. in hours, especially if there isn't any sort of long-term, I even emphasize short-term game plan for that. With the Dayton's Bluff Library, for example, I'm not hearing any sort of plan around how we are going to make our library resources more accessible to the neighbors in that direct area. And so to me, it's like, no, I definitely do not want to see this happen. I appreciate, Chair Johnson, you bringing up Duluth and Case Rec Center because I was wondering if Where was that in the slide? And my first reaction to the potential closure of this for next year is, well, if this plan follows through, then what I'm going to need, and residents in Ward 6 are going to need to hear, especially in the pain failing area, is they need to really hear a hard commitment and get a solid plan for what a rebuild of the Duluth and Case Rec Center looks like. Because we absolutely cannot be without a rec center for years and years. I am very just thrilled to see all of the design work being put behind the rebuild for the Duluth and Case Rec Center already. To me, there's still a lot of questions around how is this project going to get funded? What's the timeline that we're working on? And I want to make sure that we're working on a very aggressive timeline for that. So there's still a lot of engagement for me to do with the community organizations, partners, and neighbors in my ward about Duluth and Case, and we'll be having very robust conversations about that. Just some other things I'm very supportive of that I want to highlight.

It's for sure the reductions. Vice Chair, I'm going to ask you to wrap up your last couple, just so I can get to a few other folks and still get to the second president.

Okay, that sounds great. Just overall, very supportive of the reduction in leadership positions. I hear a lot from our union staff that they want to see more investments in our frontline workers overall. And then I just think we just need to update our fees a lot more often. If there's a way to automate them, I would encourage us to do that. Thank you, Chair Johnson. Thank you, Vice Chair.

Yeah, thank you, Chair Johnson, and also Melanie for, sorry, not Melanie, your name's not Melanie. Thank you. Thank you, Mitchell. Sorry, I was looking at Melanie. For just a lot of this information, you know, like VP Ying shared, It's a lot of information and I promise I'm not gonna do like a brain dump. I I definitely Anticipate to having you know ongoing conversations about this But I just wanted to just on the high level just like how I'm thinking about it and just everything I've heard really just just really hearing about the approach. There was a three-prong approach around reductions, efficiency, and operations. And I'm happy to hear that we at least have a level set in terms of how are we moving numbers on the page. what's really important, like how do we keep efficiency, and I really want to see our administration move beyond just solving a math problem for next year, but really around how do we get more of a central operations improvement and management across the board. There's some examples here, I think, like with the library moving some of its budget to public works to do collections. I would love to see within OFS, what is our centralized systems of collections like that? think will help solve a lot of some of the directors issues I would like to also see just how how well our poly system is operating some of these really large budgetary investments we don't really get a chance to see what the outcome is we you know obviously as a council like we want to just make sure that our staff has the tools to be able to manage efficiently and also to ensure that our services are modernized for the future. So I think I appreciate this as just kind of like the first proposal. And I don't think it will be solved this year, but I do think I would like to move forward into next year as we're looking at this budget to move forward in a more of a measuring performance budget outcome. Just because I think at the end of the day, when we have to vote for the levy and then people have to pay property taxes and the cost of living is going up, everyone has that question around, what is my true return on investment? And I know sometimes math and English doesn't really mesh well together in terms of how we articulate that. But it's really important that we we are able to see that throughout this budget process. My last two things, because I know we have to get to the budget actuals. I really like this last slide in terms of alignment with council priorities. I don't want us to end without mentioning that our top strategies that we had was to manage and reduce overtime pressures for both police and fire. And I don't really see the reduction of police academies, or excuse me, the police academies and maintaining the fire shift as really solving that. I really will want to hear not only from the fire and police, but also OFS around what, whether it's policy, what guardrails in terms of budgetary controls that we can have on overtime spending. I know this has been, I don't know a city in the country, maybe a few though, been able to help manage overtime spending. And I know it's a really sensitive subject because we want to make sure that we have enough emergency response. And we never want to tell anyone no, right? And we never want to have anyone having increase in response times. But this is something where I really, really think we need to do a deep dive in terms of better managing that. And then the last thing. I think I'll just, I think I probably will just pass there because I had another thing. Oh, the last question I have. So that was my statement, but my question I have, it was the slide with the general fund FTE changes. And you might have mentioned this early on, but every single department has the changes, whether it's positive or negative. But for the police, there's just a dash. So I'm just curious to know why there isn't a total change. for changes for the police.

Chair Johnson, council member. It's because the numbers net to zero there for the total. So there's an addition of nine, a shift of four. So that's plus 13, and then there's a reduction of 13. So negative 13, positive 13. So it just ends at zero. Got it.

Thank you so much. Appreciate it.

All right. So for folks that have some additional questions that we didn't get through, I am going to transition us to the budget to actuals. I will be sending over quite a few different lists. Director Carney and Budget Manager Mitchell, you'll hear from Kamud and Verma most likely with additional council questions. I hope that folks are also tracking the questions that come up in live conversation, because there was quite a few here. There'll be a couple additions that I just don't want to take time for today, such as for the climate fund, where is it being housed? I hear the directors being in OFS, but where's that actual fund dollars going towards from the franchise fees? There'll be questions around just really specifying when we say things are coming from a special fund, which special fund they're coming from. and how that's quantifying the HRA budget, which is still not posted publicly, so folks can look at that. And I think that there's just some pieces that folks will have as follow-ups, so we'll get that compiled for a list for you to send out to you guys with some additional questions related to this presentation, and maybe as we go forward to the departments, too, so they can be prepared to answer those, especially for the larger departments that'll be coming before us in the next couple weeks. Thank you.

Chair Johnson, thank you.

Chair Johnson, members of the Budget Committee, my name is Joe Harney. I'm the Director of the Office of Financial Services. I'm here today to present to you the Q2 Budget to Actuals report. Before I begin, though, like Ms. Fitchell, I'd like to thank the work of everyone on OFS Budget. It's a colossal effort to accurately and timely report a budget of this size, and trust that the city has a very talented group of individuals that work very hard to get it done on time here. Again, just an overview of the Q2 budget to actuals today. Hopefully we can get it in on time. The top line takeaway for the budget committee on my end is that Q2 general fund spending and revenues are similar to that of Q2 2025 on a percentage basis. As the previous director, Logsdon, noted in the Q1 presentation, there are some general timing items to mention on the accuracy of this information. That begins with payroll. It's reflected in IN-4 several weeks after the end of each pay period. There are transfers that occur at various times throughout the year that are dependent on both department and business need. Certain transfers occur frequently, such as debt payment transfers, while others occur only once at the year end. We have internal bills and charges. So some internal charges occur monthly. Departments manage these internal bills for services according to their business practices and may, as a result, occur monthly, quarterly, or annually. And then lastly, there are, again, internal services that may be delayed based off the timing of the calendar year and the close of the prior budget period. Said plainly, we begin the next year's budget behind, and it takes us time to catch up on the month-end close process. I'm confident we're getting there with where we're on the calendar now, but it's just a lagging indicator that tracks throughout the budget year. One big asterisk over all of this is the actual data is cumulative through June 30th, 2026, and the data was pulled on August 12th. These numbers change every day, so the minute it's pulled, a number's updated. So trust that if you or your staff are looking at information since August 12th in the system, that the explanation for the difference is almost likely because it changed as a matter of course. The first slide included here is the budget to actuals rolled up by department for expenditures. On balance, comparable to Q2 of 2025, which was 47% of budget to actuals, we are at 50%, so slightly higher. Council Member Bowie had a question on the previous presentation about the judgment bonds. There's a technical explanation that meets some of that difference, but not all of it that I can provide. That's because we, of course, issued the bond and paid for the first payment. We have not yet processed the budget amendment to the 2026 adopted budget to increase the expenditure and the revenue budget for that bond sale. It's a bit of a paper process, I know. Trust we're paying the claim. It has happened. But we just haven't adjusted the numbers on the back end. And trust that through the course of this report, this has been uncovered. And we will be coming with an adjustment to that adopted budget for 26 soon. A few highlights here in the notes column that I'll pull out, particularly on the general government account line with the $20 million approximately budgeted in 26, shows as 74% spent. Tied back to my previous explanation, you can think of this as we close each month, we allocate out the actuals here, more to the other departments that are receiving those services and those charges. So when we come in quarter three, the number will be slightly less for this line for general government, but it will be slightly more in other departments depending on their use of those indirect costs or their assignment of those indirect costs. And then lastly, PED general fund spending is transferred to the PED admin fund. Second slide with content is the budget actuals for revenue. It's worth noting that on balance, we are tracking neatly to Q2 2025. I will talk about three of the notes columns, or three of the notes rows here, and then two departments that are under their previous revenue budget targets from past years. Again, on financial services, There is the depositing of interest payments at OFS. We then have to go through a manual process to reassign those interest payments back out to individual departments who are responsible for managing those sources. That process, again, is manual and takes time and will eventually, like the expenditures for general government, be smoothed out as we just go through the year. For general government on the revenue side here and library on the revenue side here, it's important to note, to confirm that, yes, we have received the first tranche of property tax revenue from the county. That happens in two buckets. And for the second bucket, we received the settlement paperwork from the county last week. So we just have to manually go through the process in INFOR to reassign that revenue and acknowledge it so that this number eventually gets updated. Again, I'm confident that Q3, you'll see the first half of property tax payments go through for both general government, the city, and the library levy. There will be some lagging indicators as a preview of Q4, though that data and that information will come near the end of December. So if we're doing Q4 budget to actuals, we may just appear to be missing a huge chunk of revenue that just manually hasn't been processed in the system yet. So two departments that I think it's worth talking about and pausing on for a moment would be DSI and Public Works. So DSI is the third row. From the top, Public Works is the second row up from the bottom. On DSI specifically, we have experienced some significant difficulties with invoicing for revenue that occurred either right before or during the cyber incident last year. And then we did the transition to poly. So we have, it's been a priority of OFS to partner with DSI to set up a structure and process to collect the revenue that is due to the city for services rendered. There's a sort of second concurrent dynamic at play in that Having Polly come online as a result of the cyber incident means that we are running into things that we need to set up in order to standardize the collection of revenue moving forward. All to say that this is a top priority of OFS to collect this revenue and set up the process. And we will be working deeply with DSI to make sure that all the structures are in place for the continued rollout of poly. And then I'll just note generally on Public Works, the data shows broadly for most years in the past that they typically come in under their revenue budget. So said another way, they collect less revenue than we initially assume in the budget. We are in consistent, constant conversations with the new leadership at Public Works to talk about why that's the case. If that is a technology problem, we should talk about the technology we use. If that's simply a manual billing process, we should talk about resources we need to manually collect that revenue. So like DSI, I trust that those two items on here, while they appear to be less, are priorities for OFS, and we intend to... keep tracking it throughout the 26 budget period so that we collect the revenue that's due to the city with that chair johnson i will stand for questions

I just want to say we're at about 11.31. I do want to say thank you to Director Harney and to Budget Manager Mitchell and your team. You guys have had a whirlwind of events that have just really, you know, really great events just with the budget address and getting the budget to actuals presentation and being in front of us to present here. It's been a relatively short, uh timeline for you all to get all those things ready for us and so just want to say thank you for being able to do that and thank you for being in person today thank you for making both presentations work we quickly had you all here um not necessarily the hot seat i won't use hot seat i'll just say we basically were like okay great there's a budget address come to talk to us and now get in front of us and present what you just presented to the public as well so we just want to acknowledge that we want to say thank you for that we want to just say that we recognize that that is hard work that is continuing to happen on the financial team. So just thank you guys for prioritizing to get in front of us. And we do appreciate you guys being first. As we go through the budget cycle, you will see, and as I shared with folks, several council members being able to engage with the budget this year with departments. And our goal is to continue the communication at the front front so we can also get to a budget cycle in December that also allows us to have what we have now, which is like a balanced budget proposal, but also a balanced budget actual that we approve for 2027. And I think several of my colleagues have a lot of things that they will share and feedback that we have around decisions that were made. We will continue those conversations. As chair, I'm committed including all of our voices at the table, and especially for folks that have some strong feelings. I do, too. I just didn't share as much to try to save the time that we have. But we recognize that so much of your role as the Office of Financial Services isn't necessarily the policy aspects of things, but the numbers. So we appreciate you guys for being in front of us to do that work. I am going to check because I'm often told to end the meeting. So we have 11.33. I'm happy to take questions, but I also want to see if people can stay a little bit. All right. Council Member Kemp.

I just have sort of a quick one, and I don't want to scare anyone with this idea. Because I know everyone's like, oh, Como Zoo is free. I'm like, it's not actually free. St. Paul taxpayers pay for it. And so I just have a general curiosity. around the amount of money that we just even get in the bins. And part of my wondering is, should, in the future, the city start to charge, and we would strongly encourage people to donate, do we currently have a process for accepting foreign currency? I was there sort of recently, and I think I saw a Canadian one, like a Looney, what is it called, Looney's and Toonies? Looney's and Toonies. Yeah. If we were to implement maybe a stronger enforcement of donating to the zoo, right, recognizing that it's not free, how would we sort of accommodate that process of accepting foreign currency? You can use the loonies and hoonies as the example of, like, do we have an internal process that we would then have to go around and exchange money for?

Chair Johnson, Council Member Kim, that is such a great question because I have a lot to say. So it turns out that You cannot convert loonies and toonies at any bank, even if it's a Canadian bank, in the United States. You quite literally need to drive to Canada with coins and go to a Canadian bank in order to convert that to US currency. So through the course of many years of operating the ComoZoo and the donation box, we as OFS have been tracking what amounts to be approximately $10,000. I'll get you an exact number of just coins in foreign currency that we can't necessarily use on a cash basis in this country. So it's been a constant thing that I've been dealing with in my four months here, and I am deeply interested in trying to find a bank that will take coins that are Canadian.

It is a joke to say this, but I wonder what the budget is for one of our staff members to drive to Canada to make the exchange happen. I'm sure that's not actually happened. But I really appreciate the response. And again, I'm not trying to scare anyone, but looking at the revenue, looking at our deficit, looking at the ways that the city can create new revenue streams, it's one that I'm interested in while recognizing that it is also impacting our fund balance, right? It's kind of like, it tends to be a little bit of a pain point. A lovely, lovely pain point in the budget is Como Zoo. So I appreciate you entertaining the question.

Chair Johnson, if I could just add to the Como Zoo question. The Como Zoo Fund itself is a negative fund. And when I mean negative fund, I lump it into a group of funds that a rating agency has began to hold against the general fund balance. So said another way, since the Como Zoo Fund is at a deficit, some rating agencies believe it is the general fund that is too at a deficit. And so I believe while not in this budget proposal, It's an ongoing conversation with the administration to broadly address the negative funds, but in more particular ways, broadly address the Como Zoo negative fund.

Yeah, no, thank you for that as well. Ironically enough, my husband and I spent our anniversary at Komozu for the first time as a couple. But yeah, I was actually surprised by so much of the things you could just access for free. I was like, whoa. So I appreciate you all having that discussion. I'm sure there'll be other conversations about revenue sources offline too, especially related to just even some of the things you identify with, like public works and DSI and getting poly up to speed and So that's really helpful. Council, you're good, okay. And then Chair Bui, are you okay with Well, I guess I saw your hands. I'm checking real quick.

Since we're here, I mean, it was safe. I think also, too, like some of my constituents have been stepping up and trying to figure out how we can generate more revenue. We're all invested in ways like that. And on the bane of Councilmember Kim's question around the, not Como Zoo, but more broadly around having a revenue sorry, increase around like toll fees. I know like toll fees are mainly operated from like MnDOT or even like on a national level. But if there's, like I'm just curious to know like where is it within the budget team or OFS or just department director led in terms of these ideas around testing out new revenue sources. So I guess it's a kind of two-point question. Where does that exist? I mean, I feel like it kind of is like infinity amongst all of us. But really, if everyone's responsible for it, then just no one's responsible for it. And then the part two of my question is just, has the city or this administration explored toll fees as a revenue source?

Chair Johnson, Council Member Bowie, I'll take the first question first. I would just say broadly to council members in dealing with community that the subject management experts are at the departments, right? But OFS would be deeply interested in any revenue generating opportunities that come across each of your desks and offices. For the second question, the short answer is no. We have not discussed considerably implementing toll fees. I have thoughts in my brain now about how that would mechanically work. And I think, Councilmember Bui, we can probably follow up more directly on the underlying idea.

Thank you.

All right. When the city attorney's office presents as well, it would be great for folks. I'd like to know if we are still budgeting $750,000 for settlement funding. I'd like to know if that line item stayed the same this year or if we made any allocations, especially with what our actual is projected for this year and last year, if we made any adjustments on the budget end for that.

Chair Johnson, we will come prepared for the city attorney presentation with that information. I can tell you, though, that the budgeted amount for settlements is unchanged in the 27 proposed budget. Not the actuals, of course. That is out of our control, but the budget amount is staying the same.

And I think at some point, one of the things that I will share is why that's concerning to me is that for the last every year that I've been a council member, that budgeted amount has not been a realistic budget amount. We've exceeded it every year and also now have debt balance or debt bonds that we are collecting because we didn't adequately budget for that. I'd like to understand what the fiscally responsible recommendation from the Office of Financial Services would be if we took into account the growing trends that are happening nationwide, especially taking into account that the city of St. Paul does not have insurance like other municipalities. And if we haven't in the past checked into insurance, I know at one point it became expensive because it was like, oh, it's expensive insurance to carry a municipality. However, when we have multimillion dollar lawsuits for years, my quick question to us is, should we check that cost benefit analysis again this year? And so I just want to share that with you as something that's not necessarily a reflection of my thoughts around the department's budget. But overall, something that is a priority for me that I've shared as budget chair is we can budget for things that we kind of foresee. And just with the amount of closed doors that we are receiving, I think it's really important for us to think about that number that has not been changed for decades and think of that as actually a beneficial number to continue to carry on our bottom line.

Chair Johnson, we can certainly give you in isolation what the actuals are over a prior period of years and what an estimate of that would be in the future. I just think it would be important to note that there's a lot more related to settlements that go on with what your budgeted amount is. And I think it's worth an additional concurrent conversation with the city attorney's office to bring in all the other variables too.

Thank you. I would appreciate that. We are way over time. And thank you guys for staying with us as well and just being able to be a part of this discussion. Thanks for the staff that are still in the room and for staring and carrying over with us. And we'll be following up with you all. And sincerely, let's kick off the budget season. We are adjourned.