for uh 20 over 28 years. Good afternoon. Welcome to the February 21st policy session of the Phoenix City Council. We'll now call the meeting to order and I'll ask the clerk to call the role. Councilman Deisio here. Council member Garcia here. Councilwoman Wardado here. Councilwoman O'Brien here. Councilwoman Pastor here. Councilwoman Stark here. Councilman Wearing. Vice Mayor Ansari here. Mayor Ggo here. Thank you so much for joining us. We'll begin with council information and followup requests. Councilwoman Pastor appreciate it. Um and next slide please. uh participated in the Whit Whitten District Neighborhood Cleanup as we they hosted a cleanup and there we were working away and cleaning those alleys. Valentine's Day, uh the district 4 team attended the chosa uh for the seniors living at Kasa Prima. As you can see, I'm there with uh some of the seniors and we had a great time playing bingo and singing karaoke with them. and you'll see the next slide. As you saw, we have those bingo cards and I'm waiting for uh the bingo winner to come up. Uh Arizona Asian Chamber Gala. I was awarded the Wing Fang Spirit of Leadership Award at the 30th anniversary of Arizona's Asian Chamber on February 11th for my work assisting businesses owned by people of color along the Camelback Corridor between 7th Avenue and 19th Avenue. The community refers this area as international district because of the large number of languages spoken there and the large variety of nationalities and culture. It was a busy weekend for uh district 14. We had the 34th annual Willow home tour and street fair uh hosted by the Willow Historic Neighborhood. Uh, my team was there from the very beginning to set up and we were pretty much the last ones to leave. So, uh, we enjoyed ourselves. Hike with a firefighter. I was joined by the mayor, uh, Councilwoman O'Brien and Councilman Garcia for the first annual hike with a firefighter and hear from a r a ranger event in honor of Black History Month. It was also uh, as you hiked, you got to learn learn a little bit of history as you hiked. Welcome Home Gayla 2023. I attended the 15th Avenue Welcome Home Gayla hosted by Save the Family Foundation of Arizona. Uh the gayla highlighted life-changing work on behalf of homeless families and children throughout Maricopa County. The funds raised at Welcome Home Gayla will help save the family continue to serve more than 550 families a year and they will be uh right across Phoenix Children's. They will be uh hitting ground and making sure there's affordable housing. Upcoming events. Ronald McDonald House. We will be cooking dinner for 30 families who have kids at the Ronald McDonald House at Phoenix Children's Hospital on February 28th. If you like to volunteer or join donate gift cards to cover the cost of food, please contact my office. 27th Avenue and Camelback Community Cleanup. Join us on Saturday, March 4th, for a community cleanup at 2631 West Camelback Road. Looking forward to seeing you. And finally, Dragon Pony Show. I'm co-hosting the Dragon Pony Show, an event that will be raising money for therapeutic programs for the LGBTQIA youth. Please come. It's March 26 from 10:30 to 12:30. and coffee chat will be at Cartel Roasting Company near 7th Avenue McDow March 1st at 8 800 am. Please come join us. Thank you. Thank you. Congratulations on your spirit of leadership award. We'll go to Council Member Garcia next and then Councilwoman Gordado mayor make it so complicated. So what's up in District 8? Uh first we had uh you can move on to the next slide. Uh Tower Plaza cleanup. I want to give a shout out to Mario Pagawa and and staff who been working hard with the businesses there, the Home Depot, Walmart, Walgreens. It's a complicated corner with a lot of history. What was great about this cleanup is we actually had day labors and the folks from the community come out um and support as we continue to look for solutions to help out the area with obviously the day labors unshelter drug substance abuse. Um but it's a good step and it and that business alliance is working really well. Next thing, Phoenix Rising. Oh, sorry. Back. I meant next. There you go. Um, Phoenix Rising meeting. We met with the businesses and partners around the new facility. Had a great meeting. Um, some great connections with the school districts. Gateway um is working with the club as as well to see if if they could be using the facilities. Really excited. reminding folks April 1st will be the first home game for the Phoenix Rising. Um then on February 5th we had the Lavine Community Parade. It was a great parade and even though me and my son were in this uh cool little 19 uh 40s bomb car. I want to congratulate uh Vice Mayor Ansari. She won the trophy for the the best float. She did do great. Uh but it was a fun time being out there uh with the community. Uh next slide. on an awesome event at uh Central Park uh with CPLC and uh some of the community members uh with the the skateboard tradeup. Um and wanted to give a a shout out uh to the folks that did this. I I'd never seen anything like it. Essentially, kids would be able to bring in their old skateboards and they got brand new skateboards. They would repair them there and then they take the pieces from the older skateboards. um to to do that. Uh for any of my colleagues that want to do this, Cow Town is wanting and willing to do this at different parks across the valley. So, it was a great event, great partnership. So, thank you to Cow Town and all the folks that put that together. I joined uh Councilwoman O'Brien, Mayor Ggo, and uh Councilwoman Pastor at the hike this last weekend. The Black Fires Association put together this hike along um with the park rangers. Um I did speak publicly, Jeff. I'm sorry I did this here, but talk to the rangers about us working to get them uh a raise and they were really happy to hear that. And I'm sure as we're going to talk about today, a lot of our staff is excited for that that upcoming conversation. Um uh with some of the upcoming events, we have a fair at uh Neb Park this weekend or this Thursday. Um we're doing this fair uh coinciding with our uh our our funds our uh the funds that uh we would be allocating. So we're having folks vote on what they need in their neighborhood. Um we're also on Saturday having our first ever event at Francisco Highland Park. this uh in association with a group of folks that want to reestablish their neighborhood association. So, we're excited about that. Um also alongside with the vice mayor, we've been working a lot on uh activities on 51st and baseline, but particularly on the conveyance channel. Uh this 5K event again in collaboration with district 7 will be happening March 4th. Um doing next slide uh tree planting at Lindo Park. really excited about this. Uh for those you all know, 19th Avenue in Southern is one of the hottest neighborhoods um in the entire city. Uh thanks to our heat mitigation office and the work that our streets department has done, we've coated the area with cool pavement and now moving forward with planting trees. Um so excited about that. Uh Circle K event. Um this is our, you know, following up a previous event. again doing this event alongside with what parks is doing with u designing and the investment that's going to be happening in that uh in that park. And the final slide is uh around our aviation and land re land reuse. Um this is happening actually tonight. Um we're really excited FA finally cleared for some of these properties to be put out for RFP. Um, this committee has been meeting for over a year and so we'll be talking about what the future um, of this area is going to look like. Thank you. Thank you. We'll go next to Councilwoman Gordado and then the vice mayor. Thank you, Mayor. This Saturday, February 25th, we will be hosting our annual Mville Jobs and Resource Fair from 1 p.m. to 5:00 pm at the Mville Community Center at 51st Avenue. This year's event will feature dozens of partners bringing forward apprenticeships and new job openings, educational opportunities, as well as important city and county resources. With over,200 open jobs at the city of Phoenix, we are excited to have job recruiters from so many of our city departments that will be on site at this event. They will have information on how residents can work in our pack after school programs or as lifeguards at our pools. We will have folks from all over the city from our police and fire departments to our streets department from Head Start and our libraries to our municipal courts and our airports. I am also excited to see the partners coming out from our labor community and the private sector include folks from the laborers training school, Kwit Infrastructure, JBS HMS host, the National Electrical Contractors Association and the IBW, the Iron Workers Union, the Carpenters Union, and our friends from the Arizona Building Trades Council. So, so if you are interested in learning more about a new career with the city or in the private sector, getting connected to an apprenticeship is is a great educational opportunity. Or anyone that is looking for a new opportunity for yourself, for your family, looking for a new job, a good a good paying job, please come and join us on Saturday from 1 to 5 at the Mville Community Center. Hope to see everyone there. Thank you, Mayor. Thank you, Vice Mayor. Thank you. Um, I have a slide deck. If you could please pull it up. Um, first up, I want to take a moment to thank uh the thousands of city workers, our Super Bowl leads, John Chan, and deputy city manager Ingger Ericson, and our public and private partners who made Super Bowl 57 weeks such a success. And a very special thank you to Eric George at our convention center and Tyrie Davis at the parks and recreation department for the countless hours that you put in to make sure that this was a smooth operation. Also, thank you to our police officers and firefighters for keeping the community safe through a very, very challenging week. I think Phoenix delivered an experience like no other. We showed off why the NFL continues to pick Phoenix as its epicenter for fun, clean public transit and micromobility options. our art scene, our unique small businesses, and so much more. You'll see some of the standout stats on the slide. And one that we just received this morning is that 92.61% of our waste was diverted, making this Super Bowl a zerowaste event. From branding Phoenix to our public safety efforts, we should all be proud of what we were able to accomplish. And up next, the men's final four in 2024. Next, this slide, uh, housing and homelessness. In February, we made progress on both short and long-term goals to address our affordable housing uh and homelessness crisis. It was great to attend the kickoff of the Spark Boxes um in Phoenix, which was Phoenix's latest sustainable housing demonstration project. The units are repurposed shipping containers that are not connected to utilities or on-site construction. So, these boxes can be placed almost anywhere. I look forward to seeing them out in the community this summer. My team has also been creating regional toolkits to help residents properly navigate city services that are available to them. We officially have two toolkits available, one tailored to the Lavine community and one to downtown Phoenix. Specific materials can be found on our website at phoenix.govdist7 in the in the community tab. I also want to give a shout out to our partners at Downtown Phoenix, Inc. because they are also leading thoughtful homelessness solutions and a we are all in this together campaign. Um so they have invested dollars towards a CBI navigator dedicated to our downtown core and they've actually positively executed around 118 individuals uh to housing or shelter in 2022 which is amazing. They hired their second navigator in October and have positively exited 35 individuals in 2023. And I want to congratulate them. The NFL took notice of these efforts and has awarded them with $50,000 in additional funding to continue these efforts. Next slide. Regional updates for South Phoenix. This upcoming budget season, I'm excited to get back out in the community with our budget hearings. I will be hosting our District 7 budget hearing at the Rio Salado Audabon Center on April 11th. If you need help organizing your neighborhood to get investments, now is the time to contact our office to help with organizing your neighbors. And with that, another South Phoenix spotlight. The Siwa Pati Collective was one of our 2023 participatory budget awardees, and we will be giving them an $8,500 grant award to expand their growing space by the SEGO and to allow them to bring in more youth programming. Next slide. Regional updates for Australia and Mville. This Thursday, February 23rd, from 10:00 am to 3 pm, we are partnering with the American Red Cross and the Funky Latina to host a blood drive at the Desert West Community Center. Why is this important? Um, because over 40 over 50% of Hispanic people have type O blood, which is the type of blood that is actually most requested by hospitals, yet they make up less than 1% of donors. So, we're excited to be partnering with the Funky Latina to do this event in Mville. Um, and hope that folks will come out to donate blood. On March 3rd, our office is partnering with Community and Economic Development for a mobile hiring event at Santa Maria Park. And lastly, I'm excited to share that additional Zumba classes will now be available at Sunridge and Smith parks now through March. You can visit phoenix.gov for more info. Next slide, regional updates in Lavine. This weekend I attended a community organized bike ride at the Lavine area conveyance channel and was proud to report back on our efforts to activate this area. You can see some of the um exciting new updates on the slide. I was also pleased to hear from residents um that they they have seen visible improvements. One resident told us she has seen a marked improvement at 51st Avenue and Baseline um because we've been really focused on on improving this area and making sure that residents receive the resources they need. Um, so we were really happy to hear that. And final slide, upcoming events in March for Women's History Month. I'm thrilled that we'll be hosting our office's second annual Norus. This event will be a multi multicultural dedication and resource fair honoring the global movement for women's rights. Um, so I have talked in the setting about uh the human rights crisis that's been going on in Iran. Same with Afghanistan. And so we will use this really special holiday um to honor the women and allies who have lost their lives fighting for equal rights in Iran, Afghanistan, and across the world. I hope you'll join us. It'll be at March 18th, 3 to 7 p.m. at Civ Civic Space Park. Thank you so much. Thank you, Councilwoman O'Brien. Thank you so much, Mayor. I um want to thank all of our public safety um staff as well as all of city staff for a very successful um Super Bowl week. I think that it went off without a hitch and uh the good Lord uh blessed us with some great weather for sure. Um, last week I had a community meeting with Councilwoman uh Stark to discuss our community's concerns regarding the increase of crime and homelessness around the Bell Road corridor uh and 19th area 19th Avenue areas um and really just extending east and west of of that. And we're both committed to continuing those discussions and hopefully including some of our um state and federal elected officials in those talks. Uh, as those who went before mentioned, I got to do attend the first annual hike with a firefighter and park rangers. It was great to see the um deputy city manager Ginger out there. and we went all the way to the top of the the mountain. And that was quite a difficult um hike, but some great uh notes along the way about um our our history and and so appreciate that walk. It was really a lot to learn. This morning, um this Councilwoman Stark and I attended the grand opening of Thrive Phoenix. Congratulations to Nina Pool and her team. Um, this will be a non it's a nonprofit in the area of 15th Avenue and Bell Road and she and her staff are committed to um helping folks who need assistance whether that's with rental assistance, utilities, food, clothing, vocational training, education support, but they are committed to helping people um with a hand up in our community. and she has done a lot of cleanups in that area and is really uh working with the community to help them out. Um this week on the 23rd there is the Cactus Park precinct dinner with the cop and that'll be at Anzio's over at Cactus um and 28th Drive. I hope you'll join us at 6 PM. And on February 27th at 5:30 p.m., the District 1 community dinner will be held at Martin's Auto Museum where I believe we have um city manager Jeff Barton confirmed for as our speaker. So, we'll look forward to that. Thank you so much, Mayor. Thank you. Any Councilwoman Stark? U Mayor, I just want to echo uh the comments Councilwoman O'y made about today's event. this morning. It was quite wonderful. Nina Pool has really jumped in to the north part of the city and is making a difference creating a nonprofit trying to help people before they may experiencing homelessness. She's really got an important mission. I think it was a great event. Um very excited to see what she's doing in the North Phoenix area, especially along Bell Road. Um and thank you, mayor, for the proclamation. That was very moving. and we appreciate that. Um, and uh, very very excited for her mission and hope we can continue to support her. Thank you, mayor. Thank you. I want to join join my colleagues in congratulating everyone who worked to a wonderful Super Bowl. We had more than 50 city leaders who were working for months and months to ensure that we had a big touchdown. And I think we we scored in a big way. Um, thank you to Inger Ericson, John Chen, Eric George, Cynthia, and um so many folks. Congratulations to the airport team. Busiest day ever at Sky Harbor the Monday after Super Bowl and 22 minute max TSA wait times. So a huge successful collaboration with multiple levels of government, which was true throughout Super Bowl on public safety. We had thousands of public safety credentials issued because so many levels of government had to work together and we were able to do so successfully. It was wonderful to see four tribal communities coming together with cities throughout the valley to host events and and we highlighted Phoenix from North Phoenix and Taste of the NFL at Chateau Lux to Farm at South Mountain hosting their biggest events ever. Uh we showed off the best of our city and so many of our small businesses got to be part of it and we are on track to set many records, some to be announced later, but um very exciting to the public works team on today's great news on more than 92% wa waste diversion. And thank you to all of the folks in public works and volunteers who put a lot of time in sometimes sticky to make sure that we hit that record. It was wonderful to hear Commissioner Goodell say that there Phoenix and the greater Phoenix area will host again. Um, one of my favorite headlines was the Wall Street Journal saying we were the epicenter of all things sports during that week because of so many things happening, including welcoming Kevin Durant. Um, on a little bit more difficult notes, I was saddened to hear that former President Jimmy Carter has entered hospice care and he was certainly on my mind as we marked President's Day. Um, he's been the embodiment of a public servant even his years after President. I spent a lot of time in school volunteering with Habitat for Humanity and can't believe he was doing it well into his 90s, but truly someone who continued to give back. Um, also want to note that this week we mark the one-year anniversary of the conflict in Ukraine and certainly my thoughts to to those who continue to fight for democracy every single day. With that, we will go to our city manager. Thank you, mayor, members of council. I'll be extremely brief today as I'm going to hand over the majority of this presentation to budget and research director Amber Williamson. Um, as you know, we're here to talk about the five-year forecast and the general fund status. Um, this is a critical component of the city's de budget development process. And to just think that three years ago, almost three years exactly, COVID 19 reared its ugly head and it it turned at that time a surplus into a deficit. However, because of your meticulous, methodical, and measured approach, we navigated COVID um and to the betterment of our our city and our residents. And today we stand before you with a very strong uh general fund surplus and a very strong budget as we look ahead. Um now that is not to say that we are without concern as Amber will talk to you about some of those things that are on the horizon that do present some challenges to us. But again I want to thank you for your leadership, your direction. And I also want to take some time to acknowledge the hard work of the city of Phoenix employees and those staff in the budget and research department which is a department that I hold dearly um considering that's where I spent the majority of my career. So with that, I'll turn it over to Amber. Thank you, Jeff, mayor, members of the council, and the public. Today, I will be covering the fiscal year 2324 preliminary budget status as well as the five-year forecast. So, on the agenda today, hold on. Helps if you turn it on. Uh, first I'll go over the five-year forecast, its purpose, and overview. I'll discuss a brief economic outlook. I'll provide the assumptions that we used to develop the general fund revenue and expenditure estimates. I'll talk about the forecast results as well as the stress testing that we did on the forecast and then next steps in the budget adoption process. So the five-year forecast, we do this because it is considered to be a financial best practice by the government finance officers association. It does provide a framework for adopting a balanced budget each year. It helps the council and guides you in decision-making to protect city services. And we do consult with various economic experts when we construct the status in the forecast, including the University of Arizona's forecasting project, the state's finance advisory committee, joint legislative budget committee, as well as economists from ASU and UVA. So for the general fund budget forecast, how we determine each year whether we have a projected surplus or deficit, we start by estimating our resources. That includes city and state sales taxes, state shared revenues that includes vehicle license taxes, income taxes as well as sales tax, the various fees and charges by the departments for the activities that they serve to the community, interest, transfers and recoveries as well as fund balance. We then estimate our expenditures primarily made up of our employee costs including pension contractual and commodity expenses as well as capital equipment outlays and our contingency or rainy day fund. Once we take our resources less our expenditures, we arrive at either a surplus or a deficit. In years where we have a projected surplus, we could look to expand or add new programs and services or increase employee compensation. If we were to have a projected deficit because we have to balance the budget, we would look to reduce programs and services or maybe new revenue sources to balance the budget. So in terms of an economic outlook, as Jeff mentioned, it's been three years since CO 19 brought on both the sharpest and shortest recession in history. That was really stopped by the trillions of dollars of federal stimulus that was put into the economy to prevent a severe recession. Arizona and Phoenix economies outperformed the nation coming out of the pandemic. This trend is expected to continue, however, at a slower pace. 2022 also brought historic high inflation, a major geopolitical crisis in Europe still going on today. Market declines, revenue volatility, as well as labor shortages. Also, the Federal Reserve actions trying to tame inflation is causing a lot of chaos in terms of economic predictions. The good news for the broader economy, there is historic low unemployment, strong job market, as well as good wage growth. So, will we have a recession, a contraction, or no economic slowdown at all in 2023? It's really hard to tell. It makes it creates additional economic uncertainty and challenges with our revenue. If you follow the economy on a daily basis, you'll see different news reports presenting conflicting information or conflicting opinions about what's going on with the economy. We do know several companies have started to lay off employees. This has reached beyond the technology sector at this point. But we have other economists who say we'll have a soft landing or we will have a recession in 2023. So don't be pessimistic. There's 10 other variables that means we won't have a recession or it is pointing to a recession. It just depends on the economist that you look to. All of this is just to indicate that it's very difficult to estimate where we're going to be for the rest of this year. At the national level, the conference board is forecasting that economic output measured by GDP will grow 0.2% in 2023 and 1.7% in 2024. Phoenix metro personal income is expected to grow over the forecast period, but at a slower pace. This is per the economic business research center with the UVA. These next few indicators are also from EBRC. Population growth in the state is expected to continue, however, at lower rates than what we've seen historically. Non-farm employment is expected to grow, but to slow down over the next two years, and unemployment is expected to start to increase. Inflation is forecasted to decelerate. This is primarily due to continued action by the Federal Reserve. So talking about inflation just to put some context around this provided this information from the United States Bureau of Labor Statistics. You can see going back to 2015 inflation was at 1.2% growing to 4 and a.5% by the time we reach 2021. But what we've seen since then are significant increases in inflation topping out in June at 8.8%. You can see that the Federal Reserve action is starting to bring inflation down dropping to 6.2 in December. It did tick back up in January to 6.3. This has caused some economists to think that the Federal Reserve will just be more aggressive with their rate hikes in the coming months. That's yet to be determined. For Phoenix Marro area wages and salary growth, this information is an annual indicator just represented on a quarter overquarter basis. What you can see is wages and salary growth in Phoenix metro range anywhere from 3.4% in quarter 1, 2021 up to 6.6% in quarter 3, 2022. However, that did drop to 5% in the last quarter of 2022. For general fund revenues, some of the assumptions that we use to estimate the revenue include not incorporating any future fee increases or decreases or new sources of revenue. Our annual revenue estimates are based on information from our trusted economic sources, including using the econometric model we developed with the University of Arizona to estimate sales tax. We applied a conservative and a cautious approach because of the additional economic uncertainty we're experiencing due to high inflation as well as unknown Federal Reserve actions. We are not anticipating a recession in our baseline forecast. However, we have built in a slowdown and our sales tax growth rates for the last quarter of this fiscal year and next year. No further impact is incorporated or assumed into our state shared revenues from any legislative action that has not taken place. So primary risk to our revenue estimates is really economic uncertainty as well as legislation. So to provide some historical um growth information for you to reference on the chart going back to fiscal year 1516 through 1920 you see our revenue growth before the pandemic ranged anywhere from 2.1 up to 6.1%. What we saw since co 19 however is pretty significant increases in our revenue. There's a couple reasons for that. One is in October of 2019, we were able to start collecting sales tax from online retailers. That was beneficial at the time. A lot of consumers shifted their buying from services which we don't tax to goods that we do tax because of the pandemic. So you see that reflected in that 9 and a half% growth rate in 2021. It dipped in 21-22 primarily because the state made the decision to defer income tax filings in the last quarter to the following year. Our income tax collections from the state are based on collections from two years prior. So it artificially lowered 21-22 and artificially increased 2223. That's what's making up predominantly that 11% growth rate you're seeing in the current year. Next year our forecasted year-over-year growth is 10.2%. That's also primarily due to state shared income tax revenue. The state increased the share with cities and towns from 15% to 18% to try to offset reductions from reducing the individual income tax rate. We are not anticipating revenue growth will stay at double-digit numbers. We are projecting that the urban revenue sharing based on estimates from the joint legislative budget committee that number will start declining from the 2324 forecast. So in terms of our overall revenue, local sales and excise taxes make up about 38% of our revenue. 42% is from state shared revenues. Primary property tax represents about 11.3% with user fees another about 8.4%. The table on this uh slide shows you our general fund revenue categories as well as the year-over-year growth rates estimated for fiscal year 2324. As I indicated, you can see that state shared revenues represent about 771 million or 22.4% of the growth to arrive at our total general fund revenue estimate for next year of 1 bill831 million or 10.2% growth. General fund expenditures. Some of the assumptions we put into the status in the forecast include growing our operating expensive based on historical growth as well as CPI. Compensation costs reflected in the status in the forecast are based on current council adopted employee contracts. We have built in an estimated cost impact from the class and comp study that'll be coming to you later in the spring from human resources with results of that study and the plan for implementation. The fiscal year 2324 and beyond is subject to future negotiations. Our contingency fund, our rainy day fund, we are growing that amount over the forecast horizon from the current 4.25% to 5% of operating expenditures. This is the council approved policy to get to 5%. So, we're trying to get there over the forecast period. The pension costs, we do forecast those separately because they represent such a significant amount of our general fund expense. We use information from both the public safety retirement system for public safety employees and the civilian system copers from their actuaries to do those projections. We're having to increase also amounts allocated for vehicle replacements. The cost of vehicles has gone up significantly roughly over 30% in the last two years. So we're increasing the amount for vehicle replacements starting at 33 million next year growing to 45 million over the forecast period. And then also for pay as you go expenditures. This includes money next year to do a new time and labor system as well as to build a new fire station located at 19th Avenue in Chandler Boulevard. Provides additional money for needed facility maintenance, information technology projects as well as various other capital expenses. I want to spend just a minute to talk about general fund pension. This chart should look familiar to most of you. You can see actuals going back from 2122 to 1617. Green bars represent our civilian pension costs. Red bar is fire pension costs and blue is police pension expense. You can see over that time period the general fund costs went up 116 million representing just about 23% of our operating costs in 2122. As we look to the future, going from the 2223 budget to the end of the forecast period in 2728, those pension expenses are forecasted to increase roughly another hundred million dollars. The reason why this is important to highlight is it takes away resources from the general fund that could be used for other programs and services additions or employee compensation in the future. I wanted to provide you just for reference also a comparison of our general fund revenue growth and our expenditure growth over the last 5 years. This chart shows revenue in the green bars, expenditures in the blue bars going back to 1819. You can see while our revenue has increased 36% over this time period, our costs have kept pace at 35%. Legislation impacts in the report that was included in your packet today and I mentioned earlier there is a risk to the forecast and that's coming from legislation. There are several bills that are being proposed this session that could significantly reduce general fund revenues and actually revenues to other funds as well. Particularly Senate Bill 1184. This is the bill that would eliminate residential rental sales tax. This is an ongoing revenue stream that comes to the general fund and our special revenue funds. The estimated impact if this were to be effective next fiscal year over the 5-year forecast period to the general fund is anywhere from 199 million to 209 million for all funds. That would include transportation 2050 parks and preserves as well as the public safety specialty funds. The impact with the general fund could range anywhere from 381 million to 400 million. This is a significant amount of revenue to the general fund if this would were to become law. So, we're following that very closely. House Bill 2003 reduces the corporate income tax rate. This would propose to reduce it down to a rate of 2.5%. Because our corporate income tax is part of state shared revenue and it's based on collections from two years prior, we wouldn't see this impact until fiscal 2526. However, over just the five-year forecast period, that's a reduction of $56 million to the general fund. There's also other bills that are proposed to negatively impact property tax revenues. And I know that our government relations office and the league is also trying to focus on the bills that would have the most significant impact to cities and towns. So for our general fund 2324 preliminary status once we take our estimated resources of 2 billion15 million less our expenditures of 1 bill881 million we arrive at a general fund budget surplus of 134 million. That estimated surplus is made up of both one-time as well as ongoing resources. 65 million one-time 69 million ongoing. As always, we want to ensure that our ongoing resources equal our ongoing expenditures so that we can keep a structurally balanced budget. These numbers are preliminary. They're subject to change and they they very may well um do that before we get to the trial budget in March. We're in the midst of 7 plus 5 expenditure and revenue reviews. Changes could also be made later in the month of April before we bring the city manager budget to you in early May. So for the general fund five-year forecast, the first year of that forecast is our 2324 preliminary status. You see that $134 million surplus. We then grow over the next four years both our resources and our expenditures. We do apply a range a little bit to revenue and expense because we want to account for variability and unknown. That's the range that you see on the bottom of the screen. It demonstrates we could have deficits anywhere from 42 million in fiscal 2526 or surpluses as high as 117 million in the last year of the forecast. Forecasts do become less reliable the further we get out just because it's uncertain. But our baseline forecast based on the mid-range of the um of the each year's projected uh surplus or deficit is 9 million for 2425, a small deficit of 9 million and 2526 and then surpluses of 22 million and 48 million in the last two years of the forecast. Stress testing of our general fund revenues. As I indicated, we do not project for a recession in our baseline forecast. However, because of the economic uncertainty and just because it's good practice, we do what's called stress testing. This is an analysis or a simulation designed to determine the ability of a given entity to financially withstand any kind of economic crisis. For the general fund, that would be demonstrated by a decline in our revenue. Because several economists are predicting that we could have a recession in 2023, we are modeling two scenarios. A moderate recession, that would be a 1% revenue decline starting next fiscal year that would last for two years. And a severe recession, that would be a 3% revenue decline starting in 232 24 that would last for three years. That more closely represents what happened for example in the Great Recession. All other assumptions are the same as the baseline forecast. So, when we apply the stress test to our baseline model, which you can see on the screen, the five-year forecast, there's the $134 million uh surplus for 2324, and we put that pressure on our revenue, declining it by 1% for a moderate recession and 3% for severe. You can see the impact to the proposed surplus next year, as well as potential deficits going out over the next two years. This is just to illustrate the importance of maintaining healthy reserves to protect from future economic stress as well as to provide just additional considerations before the council would make any long-term financial commitments. Next steps in our budget adoption process on March 28, we are scheduled to bring back the trial budget as well as the preliminary capital improvement program. In April, we'll be taking the budget out to the community for community budget hearings held between April 3rd and April 15th. In May, on May 2nd, will be the city manager's proposed budget presentation. Then the first vote of the council is scheduled on May 16th. That's an important milestone in the budget process. If we if we don't have a decision on the budget at that point, we can't move to June, which is our legally required budget adoption steps. That's the second vote scheduled for tenative on May 31. The final vote is scheduled for June 14th and then the property tax levy adoption would be scheduled on July 3rd. And that concludes my presentation. I can answer any questions. Councilman Wearing. Uh thank you, Mayor. Um Amber, so on I guess it's it's uh slide 27. Um I wasn't here for the last great recession, but if I remember right, there was a 200 for some reason this number is etched in my skull. $270 million deficit on what I'm guessing would have been about a billion billion two budget. That's correct, Councilman. So, as a percentage, it seems like that was a much greater deficit compared to what you're talking about here if there was a severe recession in 24 and 25. That's correct. I'm not saying it's good. It's just obviously um it's more manageable when you have a smaller deficit and you got more revenue. So am I am I misreading that or is that No, Councilman Wearing, mayor, members of the council, you're absolutely correct. The revenue declines we actually saw during the Great Recession were about negative4 to neg 5%. So it was it was more significant than negative3. Um my talking point regarding it's it's similar to what happened in terms of the duration. Okay, so we saw revenue declines for about three years during the Great Recession. Now I'm not anticipating this would occur outside some, you know, economic, you know, event that would cause something similar to the Great Recession. It's just for purposes of demonstrating what it would do to the ending balance. Okay. Yeah. Thank you for that because I was like it was only 3% seemed like more. So you're saying it is more but you're saying sort of ballpark. Um I will say I asked similar questions about this in maybe 2005 or 2006 at the state and they gave us modeling like here's like what the worst would look like and the actual worst a few years later was so much worse than that. I mean it wasn't even like we're talking about the same thing. So, you guys have done a fantastic job. You can see how fantastic on uh uh chart 21. You've done a great job of matching up our revenues with our expenditures, but your point is well taken that if if it really hits the fan, you don't know how bad it could get. Having lived through that, I have no desire to replicate it. Hopefully, you're right. It's not going to happen. But, um I would argue the severe recession mentioned here, you know, you can a few points to that. Um, and you've got recent history to look to like it's not like it's impossible. So, um, but even then it it should be more manageable than that was. At least we got some experience, too. Unfortunately, that's true, Councilman. Thank you. You're welcome. Councilwoman Stark. Thank you, Mayor. Um, as we all know, the budget hearing process is very important. We've certainly seen changes to the budget when we have people testify. So, I know we're going to have a lot of in-person budget meetings this year, but what else are you going to be doing to get the word out so that we get really good comments? I mean, I I think that's so vital to the process. And then how are you going to weave in to the budget discussion what we're doing with the the geo bond potential election? Is there going to be some interface so people understand that maybe some of the things they might want may be handled through the bond election instead? So I mean what are we going to do? I I think I know the answer but for the public maybe we can talk a little bit about Absolutely. Thank you for the question. It's a good question. Um, so we will be doing um a lot to engage the community in the budget process. I know that's very important to the council, including rolling out our fund Phoenix tool. That's that interactive tool that's available on our website that will be updated with the proposed trial budget. Residents are also free to contact the budget research department directly through phone or through email. Obviously, attending one of the 12 budget hearings that we'll be having in early April is another way that they can have their voice heard. They can also participate obviously in the budget meetings that will be presented to council to weigh in on what they'd like to see in the budget. To the second part of your question, we will be providing at the budget hearings anformational video about the general obligation bond program that was approved by the city council in December so that residents will see what's going to go to the voters in November. It'll provide some highlights about the project as well as direct them to our geo bond website that includes all of the project specific information that the council approved. Great. Thank you. And I I think too it's important while you u present to the public, you show how what they have to say makes a difference. I think we got a park in district seven because of that a couple years ago, right? And yeah, I think so. And we got a couple pickle ball courts down in district six. So I think if there's a way you can weave that message in is that we do value what you have to say, I think that would be great. So thank you. Thank you, Mayor. question. Council member Garcia. Thank you, Mayor. Um, thank you all. This this is great. I think in a similar question with the gold bond is um some of the federal funds that might be left over. I think it's important to have that conversation. I know this is separate, but as we have the community outreach, which you know, I know we always do a good job about that. Um, I don't know, maybe having an update on that so that we could say, you know, also, you know, we have we have a healthy budget this year, but I think we've all come to a place where a lot of this um money we have this year is probably going to go to the employees. And so, as community comes up with things or needs that they may have, I think it's both important to point to the bond like Councilwoman Stark said, but also seeing if there's there's more funds there. Um, So, it's more of a statement, but questions. Um, I know there's some hypotheticals if the state ledge does certain things. Um, and I'm don't expect you to say it off the top of your head, Jeff, but what what and should we be considered other revenue sources for ourselves um or adjustments and other revenues um that we can do to prepare in case of um uh Mayor, members of council, Councilman Garcia, uh all great questions and all great comments. Um I'll start with the easiest thing first and that's your your reference to ARPA and the federal stimulus dollars. Um, as you know, we've committed to doing now every six-month um, sweeps of those funds to look at programs that are under spent and not spending their funds uh, fast enough. So, we just uh came back to you in January with some uh, reshuffling of the chairs on the deck. Um, we'll schedule to come back to you again in six months from this from basically June right before you go on break. We'll do another um, recapture exercise and rep prioritize those dollars. Um, we are about 50% spent on our ARPA dollars at this at this point in time, which which for the most part is in line with where all of the other agencies across the country are with their ARPA spending. Um, some of those things, as you know, took a long time to just kind of come to fruition, and we're still shephering some of those through. As it pertains to other fees and revenues, unfortunately, you know, I I'll be preaching to the choir for a bit here. um we're not a business and so our ability to throttle up the cost of a particular commodity or service, we don't have that like like our businesses do. So, as you see all of us that are paying $8 for eggs, um now um you know, we don't have that luxury. We have to live within the confines of what our current tax construct is and what our what our revenue streams are. A large portion, as Amber mentioned, over 40ome percent of our revenue is shared with us from from the state. We have no control over that. Um we do have some control over our property taxes rates which again we have elected to keep those the rates flat um to release relieve some of the burden and the pressure on our residents. Um as it pertains outside of that you know there are other taxes that the county that the council can decide to levy. However in this environment it's probably not one that we would want to do given that folks are experiencing additional pressures. So, I think when if we do hit um some of the the turbulence that Councilman Wearing referred to in some of the things you're talking about, I think we'd have to weigh all options at that point in time and that means cutting services, holding positions vacant, sweeping vacant positions, as well as, you know, looking at new revenue streams. But as of right now, I think the way we have things lined up, we're fairly confident that we can live within our means. Um, if if one of those other things do happen to us, we'd have to have a serious conversation with the council about what our priorities are as a city. Thank you. Yes. Could you put to slide 22, please? As we move to slide 22, I want to talk about the fun uh Phoenix. Uh I went through the report and it looks like only there were only 13 submissions. So uh my question is what are we doing to uh make sure that residents are aware of fund Phoenix so that we can move from 13 submittals to a whole bunch. Um so I'm hoping that there's an educational campaign around it. Um the other piece is that uh and just looking at it and and so I don't know how you get that information out before the budget hearings because it the budget hearings is compacted this year uh by being done in two weeks versus us starting in March and part of May I mean part of April. Uh the where the schedule I saw was two weeks. Um, so I think we need to relook at that for the following year as we are uh back out in the public and be able then to expand it uh within further in March and April and just spread it out um grace uh spread it out so that people can attend at different moments in space and time. My question on um slide 22, what are we doing? And I don't know if it's for you, Amber, or the uh intergovernmental uh relations, but what are we doing to let the residents know that this is going to impact uh us and them really um SP 1184 and HB 203 and what are we doing to encourage our residents to actively participate uh in vocalizing what it would do to them or do to the city uh at in in a legislative uh platform. So, do we have a strategy? I guess is that's what my question is. Thank you. Uh Councilwoman Pastor, I wouldn't know what the city is doing from a perspective of with what government relations is doing or the broader uh campaign or communication strategy to fight bills. I I wouldn't be able to answer that question. the mayor. Um I believe all of our government relations staff are actually at the legislature today um working on doing just that, fighting those bills. Um typically what what the city does, we we don't necessarily go out doortodoor or or reach out to our individual um residents. Um I think that is some place where we can play a definite stronger hand. We don't do that now. We usually rely on our our lobbyists. We also rely on our relationships with other individual elected officials. And that's where you also come into play if you've got those relationships with some of your other counterparts that are down the street. Um having the conversations about the things that we'd be forced to do if they did take this action. Um that that's the other piece. The other place where we play is, you know, as as city managers, we also talk just like you as elected officials talk. And so we have a unified front on fighting a lot of these bills. Um, I was just at the ACMA conference in in Sedona a few weeks ago and all of the city managers and towns talked about the strategies and all of the different things that we needed to unify on in terms of fighting these. We can definitely do a better job with educating our residents um about what the impact of some of these bills are. We we don't do that currently. So, that that's obviously an area of improvement. Well, Mayor, can I speak? I I guess my response to that is this is uh critical and there's nine of us that sit up here that could uh activate a a voice in a space. The other piece is that we have coffee with the cop, dinner with the cop. These are kind of conversations we can have uh especially in our coffee chats too of saying hey you know these things are happening. Um and I think we have to uh utilize all the tools that we have across the city and departments that are in that space and um and activate them. Also uh NSD uh participates in a lot of our community events and is at our community um chats I guess is want to say in speaking. So, I just think we do have to come up with the strategy. Maybe not today, but for the future, because these bills are not going to go away in the future. They're just going to keep hitting. Mayor, members of council, Councilman, Pastor Lori, actually just passed me a note. Um, we have a standing communications meeting that we Lori and I chair with our internal group. So, we'll add this to our agenda and and start working about a communication strategy. Okay. And then my next question is on the budget hearings. I heard that we would be what is besides the budget. What else is being spoken within those meetings? Right, councilwoman um pastor, mayor, members of the council. So, we're going to run like we do every year with the budget hearings. We'll run a trial budget video. Um that video and then also provide a tabloid that will be done in English and Spanish. By the way, uh we we can't put those things together. And I want to mention this because this timeline is important. We we can't take a trial budget to the community until we have a trial budget presented to the city council. So that's why budget hearings always take place in April. The budget hearing process also has to be wrapped up in time for us to be able to prepare everything for the city manager's budget, which is the the first Tuesday in May. So it is a very condensed time frame. Um historically speaking, the budget hearings are always at about two weeks. So in in addition to providing the trial budget at the budget hearings, we're also going to run the general obligation bond video and provide a handout that uh demonstrates to the public what the council approved on in December for the recommendations from the geo bond executive committee. It's those projects and programs that you all approved in December. So, we'll provideformational um a video as well as a handout so that the members residents who are attending those budget hearings will get that information on the proposed bond program and know that the election is coming in November. Okay. Will we go ahead if I may add the question you also had about the fund Phoenix tool. It is usually this at this stage in the process those numbers are not necessarily out of line. Typically when the trial budget comes out, you see a little bit more uptick because we we load the trial budget into the Fund Phoenix tool to get more resident feedback particular on the things that we're proposing. And thank you, Jeeoff. If I can just add to that, Councilwoman, so you're aware of what we're trying to do from a communications campaign perspective. We do work with our communications office to put information about the Fund Phoenix tool and the budget process overall on social media. So on Facebook, on Twitter, uh we put information out in the PA's newsletter that goes out to residents in their water bill. We are posting things on the newsroom. We try to interface and provide information to the media. So we do a pretty broad campaign to try to get the word out. Those submissions are from people who actually went through the entire entire tool simulation. There's more views of the tool than that what you saw in that recent report. Um but it does take, you know, about 10 minutes for a resident to complete the information in the tool. And as as Jeff indicated, once we load that with a trial budget and really start advertising that more, we I expect we'll get more traffic in the tool. And then one last question because you did bring up water. We will be discussing uh a water fee hike. Will that be discussed at the budget meeting? Um not at the budget hearings themselves. We're not planning to discuss anything about water. Okay. No, there will be staff there um that could answer questions about the water fee and we'll be passing out some information most likely relative to the water fee. Councilman Deisio. Thank you, Mayor. Uh mine is what I talk about every year and that's about our pension costs. uh we've got that additional $134 million and to allocate a big chunk of that if not all of it if we could to the pensions I think would be a benefit to everybody. And just to explain it out for every dollar we put into the pension debt, the unfunded debt to pay it down, it saves us 7.4%. That's a big return even in this market here where we have rising interest rates. But a 7.4% return for every dollar we invest into paying down our pension debt, the better off we are. The second reason is that with our employees. It provides a security blanket for our employees to be able to know that the pension debt is completely well, it's never going to be completely paid down the way we're looking at right now, but at least they'll be in that direction. It provides a a security blanket for the employees to know that we're focused on their on their pensions. The third reason is that it's fiscally prudent to do that for the public. for every dollar we have to pay out in pension debt and covering unfunded liabilities is one less dollar of service. Now, I know it's not sexy or it's not glamorous in a way to where people think, hey, wow, look at all this stuff we're going to do. But what it does, it provides long-term security and financial stability for our city and for our citizens. We've seen this across the country where cities primarily in the east have neglected their pension debt. Then they end up having financial issues and they just don't have enough money. So if we don't do this, if we don't start focusing heavily on our pension, and I know Jeff's doing an amazing job on that, but a real focus on that, we're going to leave our children and their children's children and not a very good legacy. And as parents and as adults, we always want to leave a better situation when we leave. So from my end of it, with that 134 million, I'd sure like to see a big chunk of that, if not all of it, be used for uh the you know, reducing our pension debt for a lot of reasons. Thank you, Mayor. Just a statement. Thank you, Councilman Deisio. Appreciate all the hard work on the forecast. It's definitely sobering to see some red though in not too far out and we we do have to to follow up on Councilwoman Pastor's point. Continue to follow what the state legislature is doing. Some of those tax cuts are very very difficult to get through. Do we have an ability to um show the impact on things like parks and preserve initiative by legislative district? Mayor, members of the council, not by legislative district. That's not how the the budget is appropriated. So, just could we do maybe overlay maps so that people could see which parks are in which jurisdiction? It would seem like it' be just a layer in GIS. We could look at doing that just to be able to communicate. Sometimes when we talk about PPI, I don't think people realize that's the swing set in your neighborhood or the grant. not PPI, but we have the public safety funds that support the block watches. The gain events would be impacted if residential rental were cut. I think many people say we have Governor Hobbes, so we're unlikely to see revenue cuts to cities, but we do have to watch HCRS, SCRs that could go around the governor and and to the voters. And people are are wanting us to watch every single penny. So, I think we have to be aware of what is happening. Well, at the same time, we want to be an excellent employer and have strong compensation lead the way. So, we just we have to balance a lot of things, but I think it is important that all of us up here communicate the value of the work we are doing and why we need to have a strong funded city that people in compensation are how we deliver services. And then when legislators want to cut certain funding to the city of Phoenix, that is how we support our community, especially those who are most vulnerable. We want to continue to to provide for those who are having a hard time right now. We have any additional questions or comments? Well, thank you. We've long been recognized for a best-in-class budget process with a lot of opportunities and different ways to engage and we are a better city because of it. So, good luck with this budget process and thank you all for the hard work to get here today. We are adjourned. the state of Arizona and we can be more competitive because the federal government is partnering with us to make sure American infrastructure leads the way. I am so pleased to have my friend Mitch Landrew here with us. He is a recovering mayor as is Congressman Stanton and it just goes to show when you put mayors in charge at any level of government, things get done. Uh both of my mayor alumni partners understand that cities are are the engines of so much of our economy that as we invest in infrastructure, people can get to better jobs, better educational options, more.