workshop. Roll call, please. Council member Nordby here. Council member Woods here. Council member Mongi here. Oh, I'm sorry. Excuse me. Council member Mackenzie. Answer to anything as you can figure out. Council member Schwear is absent. Mayor Mongi here. The agenda, please. I'll make a motion. Council member Kinsey. Second. Second. Council member Woods. All those in favor say I. I. I. Thank you. Topics. All right. We got two topics tonight. Um we're going to kind of flip them around, I believe. So, first topic up is going to be the first quarter 2025 budget update. Uh general fund and enterprise funds. And we have uh finance director Winnick here to discuss. Well, good evening, mayor and council members. Uh is this working good? Um this this item before you in the workshop, I don't know if we can hear or not, but um is really kind of giving a uh kind of a just a budget update on the first quarter of 2025. Again, it's it's it's early and you're going to see in there that we haven't received a lot of the revenue um especially in the general fund because, you know, property taxes aren't due until May. We don't get uh local government aid until June. Um, so you're going to see a lot of that and it's, you know, this is really a speculation of of just looking at everything and kind of trends from past years of where we kind of project that we would be at. Um, so taking a look at the general fund and then our enterprise funds. Um, and our general fund, um, as you're aware, um, you know, the city council had approved a balanced budget of about $10.4 million. Um right now we're kind of looking at um that for 2025 that we should be running positive about $142,000 and and again it's early in the year. It's hard to to to really project um kind of the components to that. Um but if we look at um the various departments that make up the general fund um right now I've got all of them in kind of a a positive um mode of looking. you'll see one that has a a bigger loss in revenue and then also a bigger expenditure reduction and that's the building inspections and that's the permits. Um and just from how the permits have come in for the first three months um will be down on both uh revenue and expenditures but they pretty much offset one another. Um so it's not a big so it's not really a driving factor in the change of the fund balance. Um the only one right now kind of uh that needs to be kept a closer eye on throughout the the year is really our police and that's just because we're finally getting to the point where we're getting a full complement. But when we go through that hiring process, it takes 3 to four months in some circumstances to train the individuals um in um and when we do that um they're they're um partnered with another uh police officer and um for that shift we're paying um 3 hours at uh time and a half of FTO time, field training officer time for for those individuals. So, we have to keep an eye on on that one because uh even right now it's with the back fill, I think we've expended about over $80,000 in overtime. Um but with the salary savings we've had and the other line items, we've been okay, but that's something that we need to to uh be aware of as we move through the year. Um and keep an eye on that one. All the rest of them look uh pretty good, pretty much in line. Um and then if we kind of look at our enterprise funds um again change in fund balances um that were approved in the budget are ups and downs but overall as I'm projecting out for the 2025 variance they all appear to be positive from uh where we had budgeted. Um and I think the the biggest one right now looking for a positive is the electric fund. Um I've got it at about 388,000. uh wastewater at about 138, uh surface water at 130, um water fund at 84. Um and so, uh bottom line is we look pretty good for right now. And again, it's 3 months worth. Things can change drastically as we go through the year. Um, but we'll uh get on this cadence of having these quarterly meetings so we're always aware and so we we know and yeah and so we can look at seeing how things are playing out throughout the year. Um that's our first item. If there's any questions with that, I certainly would um take those right now on either the general fund or the enterprise for 2025. No, pretty pretty good. Looking forward to the quarterly. That's good news to be able to keep an eye on it, get a good barometer. The second item, we're going to spend as much time as we as we want on um tonight because we got the remainder of the of the workshop and I think it's really critical that we do talk about this. First of all, um there's some pizza. So, I I want everybody to make sure that they have a little bit um of pizza. The reason for that is because we have something to celebrate. Um this organization has something to celebrate. Uh something that um for an organization that is uh smaller um in um population um that is carrying um as much debt um that we do from a ratio standpoint um and that we have a little lower than uh median um income of our residents here. we've achieved something that is is is actually quite remarkable. Um to me what it sign what it's a sign is that it affirms what we the path that we have been on um the last three years. Um and um I couldn't be prouder of this organization for the accomplishment. I've I've uh titled this planning, support, and fiscal responsibility because that's how we got to where I'm going to show you in a second. If you're unaware of of it, I'll give you a little bit of backdrop. As you're all aware, um we had a bond sale today. Um there's an item to um pass at city council about the bond results. When you go into a bond sale, you have a bond rating call. Um, and S&P performed that. Um, and Brian and I, um, with our, uh, consultant, Baker Tilly, um, Michaela, who will be here later on this evening, um, we took that call. Brian did a magnificent job of representing the city. Um, somehow we really emphasized the positive things that have been happening in the past, uh, three years. And as a result, um, this is what happened for the city. Um, our bond rating, um, was upgraded from a double A to A+. There's only one more step above that, and that's the AAA bond rating. Um, will we get there? Not with the amount of debt, and that not with the the other parts. But I I I I think that's something to to say about us because I'm just I just quoted I just pulled out two quotes that came out of the S&P uh rating um which is attached to the document and I and I do think it's very important to read each and every word of these two. The rating change reflects our view of the city's material increase in available reserves to stronger levels than we expect it and we expect it to sustain. It also reflects our our view of the city's relative relatively recent adoption of a formal fund balance policy as well as a regularly updated long-term operating forecast which believe we believe demonstrate its commitment to maintaining structural balance. a prudent approach to financial management, including annually updated 10-year financial and capital plans and up uh an adopted fund balance policy and routine budget amendments enabling the budget to track changing conditions further support credit quality. That really speaks volumes and and what that really is coming down to is that we have done an amazing job as an organization and it's not just one person. This is a whole team. It's a whole organization. This comes from our city council, our city manager. It's our department heads um that have made this possible. Um but it it really is about those 10-year capital plans, planning, planning, um making it comprehensive, making sure that we're covering everything that we possibly can. Anything that needs to be replaced, anything that needs to be purchased, um that's a capital item. It's looking at our um you know um our enterprise funds, our internal service funds, our um whether it's our park fund, our general fund, and we're doing 10-year um financial plans on there, trying to get an idea of what type of rate increases we may end up having to do that as it incorporates our expenditures for our our capital improvement um plan. Um it's making uh a commitment um which the city council has done um in 2025 being the second year of dedicating levies um for some of the items that we've we've acknowledged that we're we're not funded to the right level to be able to take care of it. um they happen to be infrastructural type of components um and being our facilities um our parks, our roads um and that's a big commitment and that didn't happen by one person that happened by a team. Um and so to have an outside organization uh write these comments um based upon a phone call and and financial information that they requested from us to submit to them is is really a big a big thing. and to have it upgrade. Um I I think uh Brian and I were quite surprised um that uh we got upgraded. Um we we we definitely um had talked before the call and and it was our desire. We would like to push for that and we would try to because we've done a lot of effort from an organizational standpoint to get us there. Um but we were we were told by our consultant that that doesn't normally happen. It's very rare that you get an upgrade like that and that uh many cities when they do an upgrade have to do a song and dance and invite them in invite uh you know the bond raider here kind of show off the city and so forth. Um and that's where I I I think um again um our city manager Brian did a stellar job of of really selling the city and and the things um the city has done and that all came from the direction of the of the city council past and present. Um, and so, um, I I I think it's something that we really need to, um, acknowledge that, uh, we've come a long I'm I'm going to use we've come a long way, baby. Uh, you know, from the from the time that I came here, um, that, uh, we've really put ourselves in a much better financial position um, with planning. Um, so planning, what have we done? We've done the 10-year capital improvement plans. We have the 10-year financial plans. We've done policy updates. Um, and you saw that in their comments. Uh, where we've updated our purchasing policy. We've updated our our uh fund balance policy. Um, we do budget projections and monitoring. Um, you know, it's that old planning, planning, planning. Um, support. Um, none of this would have been able to happen if it wasn't for the support that we've received from city council. Um I you know Brian had asked me the other day I or I had said to him I said you know you realize in July I'll have been here for four years. He goes four years. Wow that's gone quick. Um, it really has. Uh, it's gone quick from the standpoint that it's just, uh, from the, again, I've said the story many times, from the first day that I came here, I felt welcomed. And, uh, almost four years later, I still feel that same way and still feel energetic and and love coming to work here at the city of North St. Paul. A big part of that is the city council. Um, has been very supportive. Good questions. um uh wanted to, you know, want to find out the information. Um and that's what staff is supposed to do. Uh give the information so city council can make the best decisions possible for the city. City manager. Um my time here, we've had our ups and downs on the city manager. Um I think one constant that that's been there has been Brian. Um when I first came walking in the door, he was interim. Um we had a city manager for a little while. He came back in as the interim. Uh finally everybody uh wised up and we made him permanent. Uh but uh he's been a great support of mine. Um and uh you know he's uh been been an individual that from again day one a lot of people don't realize that uh he was a very important part of making me feel welcome because you've heard me say that I came from an organization Ramsey County which I absolutely loved. It was my home. I was there for over 32 years. Um I came here that's a big change. Um, Brian sat six out of eight Fridays. I like to go and have a good time on Friday. Brian wouldn't let me do that. He'd sit there for hours and talk to me. Uh, but, uh, made me feel welcome. Um, and then the department heads, I I think you realize it. I've heard city council make the comments. Uh, we really have an exceptional group of department heads. Um, you know, we have, uh, one in the audience there that is probably, um, you know, second to none. Um, as far as, uh, their diligence. I know you probably don't see him or I probably I'd have to introduce him. Um, but, uh, the diligence, uh, you can give them, uh, a project and he's going to be pricing it, uh, any which way to make sure that, uh, the city's getting, uh, the best bang for the buck. Um, very resourceful. Um he's uh very well he's very blessed that he has uh Randy Miller uh being his superintendent. The two of them work very very well together. all of our department heads, whether it's Jason Miller and or Jason Melinger in our um uh fire um department to uh John Wick in electric. Um I should probably say your name, Ron, um at public works. Um Ray Rosales as our police chief. Um and then we'll be having a community development director coming in, I believe, on the 28th. Uh I think I think the team is is very set that um there's a whole different vibe and feel on our department head meetings. Um we had one at 8:00 this morning where you know individuals are free to share things um and really have those conversations and uh that's important. And then staff um you know at the end of the day staff is what makes this this place successful. Um and we have some amazing staff. Um and I I I my familiarity with that is that I see a lot of the community development side and the finance side. Um excellent comm community uh customer service uh relations. Um I hear stories left and right and you see the results. Um public works um can snow at any point in time. Those individuals for six months out of the year their lives are on hold. You never know if you're going to be called in, called not. Um but they're there. Um electric um what kind of response time do you have? You very rarely ever see our electricity in this city ever down. Um you know um that's amazing. Um and um it's just a great great environment. Um I talked to our police force um and our fire department. Um always dedicated, always there. Um we're finally getting to the point where we're going to be hopefully at full complement in the police department. Uh so we just have so many great assets. Um and then we can't overlook a person who's sitting to my left who does so much for our organization. Um you know in city clerk type of functions and our HR and that's Jenny. Jenny's been you know instrumental. All of that all of that together is what's made this all possible. um of getting that bond uh rating increase. So, that's a lot of the good news um in the in fiscal responsibility and kind of I just kind of put some bullets. You probably have a lot of other things, but it's a conservative approach. You know, when we prepare our budgets, we we do a conservative approach. I don't um I purposefully don't um budget all of the interest income that we plan on getting each year. Why? because need to make sure that we're going to be able to hold that 50% fund balance in our general fund. Um, and that's important. Um, our department heads are very diligent and you've heard me speak to that. Um, you know, Ron and and Jason are are two of the very best when it comes to to that financial stability. Um, we've achieved it. Um, we have we have very good uh reserves um based on our fund balance policy. Um, we're sitting in a pretty good position moving forward. Um, things can change. It's a snapshot in time. Things can change. There's there's there's new demands. There's uh, you know, new priorities. Um, and we're going to get into a little bit more of that uh, into discussion here as we move forward. Taking a a snap snapshot look at the 2026 budget. Um, and good stewardship. um you know um that that's probably one of the biggest importance. Um I I used to uh present a training in Ramsey County on on purchasing and the guidelines for purchasing. And one of the things that uh I would always stress is is to individuals to treat the money as if it were their own. Uh it was kind of kind of interesting. I would talk to people and and whether they were um having a little home project done, they would go out and get four or five bids because they thought the price was too high. Yet all of a sudden they come into government and it's kind of like a it's so cumbersome. You know, what do I got to get this bid, I got to get that bid, and that oh just just have them do it. You know, what's the difference? Well, we're playing with somebody's money. Um and we met we better make sure that u we're doing our job and we're being prudent and we're being good stewardships. Um and I think we do. I think this organization does an exceptional job on that. So, here comes now into tough conversations in in the future. Um, we start to look at the 2026 budget. Um and kind of a starting point and and this is based on our planning to date as as I've mentioned that uh city council um to date for the past two years have been dedicating some levy increases to the parks facilities and street plans. Um if we continue that um in which is is really required um based upon our capital um improvement plans that total increase is $433,000 or approximately a 5.6% levy increase. That's kind of our starting point of where we're at. items that are being discussed by city council that have not been included in any of our planning in in our capital improvement plan um to date is the community center as far as the operational costs. We do have the capital in there um as you remember from um last year. Um the HGA park studies has not been included into um the capital improvement plan. And then it doesn't include if we were to be seeking any additional staffing levels um within our organization. So again, bring you back, we're already at about a 5.6. It does not include any of these. Um, so some of the strategies that we're going to be looking at as we move into preparing the budget for your review and questions is that we're going to be challenging our department heads to reduce costs where possible. Um, and we're going to be taking a hard look at what historical costs have been. Um, why they need um those funds. Um, making sure that we are tightening up our budget as much as possible on the expenditure side. Uh we're going to examine surpluses for opportunities to minimize the levy increase. Um we've done very well. Um we've performed very well. Um as you're aware, you know, for the general fund, um we had approximately a million dollar surplus. Some of that's needed to maintain our 50% fund balance per our policy. Some of it can be utilized. Um, we'll take a look at that. Um, and see what we can what we can do. Um, once we've finalized finalized the audit, then I can start to put together our our 10-year financial plans. There may be if we're performing better in some of the other funds. There may be some some excess um surplus that that's in there based upon our plan. We have to remember um all of that surplus is one time. um you spend it, it's gone. Um so we have to be looking at that and keeping in mind what is our plans um what's in our capital improvement plan. And again, a capital improvement plan is meant to change. Um so city council is going to have to balance those needs. Um and it's going to be balancing those needs, you know, based on those on those three unknowns that we have right there. meaning on part of it on the community center, part of it on the our park system, and then part of it if there's staffing um needs. Um but we're going to need part of that surplus to meet the fund balance policy. Um again, it's only one-time expenditures because once it's gone, we don't have it anymore. Um and right now and part of our disclosure that we give to S&P for the rating is that we're we were bonding here in 25 per the plan. We're bonding 27 bonding 29 for streets. There wasn't bonding for some other items onto it. And if we vary from that plan, the next time we have a bond rating, our bond rating has a good chance of going down because we're carrying more and more debt. kind of want to talk about debt for a second to kind of put things into perspective that there's many times that um I hear a comparison um with our city in the city of Mounds View. Um we're comparable in size. Our makeup's a little bit different. Um we're much more heavily on residential. Um they have a little bit more commercial. Um they have a decent fund balance. They're over 50% fund balance. Um and they actually have [Music] um some additional fund balance that they have put in that is for future plans for future expenditures um and still maintaining the 50%. So they're higher in in their general fund fund balance in aggregate than we are. Um but we're not too far off of it. Um, but what really hurts us is you heard me earlier talk about there's two components. There's the lower median income and debt. So, I just kind of pulled this out of out of out of the financial statement for Mounds View for the year that ended 2023. 24 isn't available yet. Um, but um governmental activities um which includes your general fund um and a number of other funds and then there's business type. Those are your enterprise. In governmental, they have at the end of 2023 a total debt of just under $5 million in governmental. Anybody want to guess what ours is in governmental? In governmental, not tax increment, just the governmental. Zero. Pardon? Zero. I wish. No. See, this is the this is the hard part. This is this is the difficult part to it. We have $20.5 million of debt outstanding at the end of 2023. Business type activities. Mountains View at the end of 2023. It's under 5.2 million. Anybody want to guess what we have? $15.7 million. They're at a little over 10 million. We're at 36. What does that mean? They have a larger base with commercial too. Yeah. But what ends up happening is when we have that much debt in our enterprises for example means we have to have a higher rate because we have payments that we have to make for debt payments. So, let's kind of look at that business since I brought it up. So, for 2024, uh, Mounds View had principal and interest, um, bond payments of $431,000. We had just under 2 million in our enterprise funds. So, think of you have to raise that much more revenue every year to be able to pay that debt. That's why our rates are starting off the ground floor. Yeah. Much more. That's why our rates are higher. Now, let's look at governmental and primarily it's going to be your general fund component to it. U because that's where you you have to generate a debt levy. Uh Mountains View 474,000. Ours just under 1.6 million. So when you look at that difference of over a million dollars, divide that by what our levy is and you're going to quickly see that, you know, we got about 12% increase in our levy just to cover that annual year. What it equates to, that's why we have higher property tax rates. So one of the things that we've been trying to do in our strategies and we implemented in in uh uh 2024 and 25 is the second year is by the dedication of that levy and those levy increases is what we're trying to do is to build up that we are actually starting to pay things more in cash than in debt. Um and if we can move that way obviously View is there. Um, so they're in a much better position that they can afford to do other things. Um, and we can't. So we raise our levy up higher to be able to do that. Um, but in time if we keep on the plan, we'll we'll be in a position like a Mounds View. Um, but that comes with a pain. As you saw, it's 5.6 to keep on our path that we're at of a levy increase. um we can't continue to keep taking the 5.6 six and then adding on top of that and ending up being in double digit levy increases um because we have residents um and we need to be aware of those residents and part of that it's a real tough balance um I think we've been seeing over the past few years um it hasn't really hit the property tax side yet but we see more and more um um some of the the information that was given um delinquencies in our utilities um or you know we're spend spending we're spending money just mailing out um um disconnect notices. Uh more staff time talking trying to make payment arrangements. Um part of that is you got a lower median income community and you got higher rates on your water, wastewater, surface water. Um, so our city manager said, "We have to establish some goals and taking all of that into consideration and saying,"Hey, our target for 2026 is going to be a 6% levy increase." I look at it and say, "He's nuts." He likes when I say that, too. We're already at 5.6 to keep ourselves on the path. That means I got point4 to play with everyone. in for a levy. That's going to be tough. What are some of the circumstances? Already playing with a union contracts of a 4% cost of living increase that I'm going to have to give everybody in 2026. It's like, how am I going to make this? Um, and that's where I I gave a little of this information to our department heads today. Um, I don't think any of them like me right now. Um, no, I'm just kidding. is that we're gonna have to challenge our department heads to reduce costs. Um, find ways to I'm sorry. Are you able to put your thing on the middle again? Oh. Oh, sorry. I'm blind. Is it Is it back? It was there to start with. Was there earlier? Oh, there we go. Thank you. Sorry about that Dad. So, we're going to be challenging our department heads. Um, and I have no doubt that they're up to the task. Um, excellent crew. Um, we're also, um, our city managers also set our goal is no utility rate increases. Told you he was nuts. Just kept on getting better. Um and he said if we have additional requests or needs, we need to start prioritizing what those are. In other words, what he what he's saying with that is that we got a capital improvement plan. It's going to change. Um we looked at it, we'll just take like uh the HGA parks. Um if we start to put that into our capital improvement plan, our plan, we can't afford it. Um so what comes out? Um how do we prioritize? what's the highest priority? Um staff definitely will try to do that, but that's where city council is really going to have to weigh in um on the vision of the city and how do we get there? Um you know, what do we implement? Things will not be done overnight. They're going to take time and planning. Um but that's part of what planning is all about. And then we try to identify and make sure that we have the the funding sources um over time to be able to get there. Um and that's the path that we're on. Um, and again, um, our bond upgrade is showing we're on the right path. Um, so we got to keep doing that. And then, um, this goal is to hold our our current staffing levels, um, to where they're at. Um, right now, um, own my own perspective of what I've been seeing. Um, I think we're good in all of our departments. I'm not hearing department heads asking for positions. I know towards the end of last year um we had uh the police chief um talking about the future and a number of additional positions um that that are needed. Um right now I in and even going into 2026 I think that's premature. Um and the reason why I say that is because we've had so much vacancy. um we really need to get to the point where we're steadily on um a path of uh full complement and being able to see what are the numbers of responses and so forth before we start moving forward with adding additional staff um on that side. Let's play let's let's see what we really have. We haven't gotten there yet. We've been close a couple of times even underneath uh police chief uh Babinroth. Uh and then all a sudden um we end up losing a lot. Um and so I think right now um we're at uh three vacancies. Um there's some hiring out there. Um our investigator just came on board on Monday. Um seems like a a wonderful individual. Um he was one of the four that was uh vacant, so we got three. Um so we're getting close. Um I think you know I think by about June or July we hopefully will be at full and hopefully we stay that way for a while but before we start adding um staffing levels I think we need to achieve that. The rest of the departments I think we're we're pretty adequately funded at this point in time. Um, not to say that things won't change in the future, but that's kind of the city manager's direction is is really that we need to look at that. And we have to take into perspective that if you add an FTE to the police and they're a police officer, you know, with benefits, you know, that's pretty close to a 2% levy increase to be able to afford that. Um and again with the target of 6% um you know that that just would be very difficult to do. So I'm going to leave you right there and questions and I want to have a dialogue of kind of where we're at. Questions, how did how does all this sound to you? What are your thoughts? Um are we heading in the right direction? Um kind of throw it out there. Um yeah, I I mean I think that this is definitely you have to start somewhere and I think um your the city manager's position is a great place to start. Um we may need to adjust it, but yeah, it's you have to start again. You have to start somewhere. um what opportunities exist outside of levy increases for funding for some of the other projects for other projects. Um there's always the you know uh the opportunity and I don't know if they exist or not but there's you know usually grants that are out there um that you know we need to make sure that we're pursuing if if they're available. Um, I can't tell you which ones are off, you know, off the top of my head or out there, but I mean that's always an opportunity. At the end of last year, we talked about uh some of those components of looking at the revenue side, you know, and some of those were um, you know, the cannabis um, you know, is that a potential for a revenue source? you know, at the end of the day, it's either you have to increase your revenue and hopefully it's not just tax levy um that's going to our, you know, to our taxpayers um that you're generating additional revenue or you have to cut your expenditures. Um and that's, you know, where we're at. Um now, from the budget perspective, um we're going to go at it at first of looking at, okay, is there ways that we can cut that budget? So, let's look at, you know, kind of the reality of things and and yeah, a lot of it's due to at times of vacancies and so forth, but in the general fund since I've been here, we've probably been averaging about $800,000 worth of surplus every year. Um, so that means there's an opportunity to cut something. Um, yeah, I'm not I'm not saying that there can't be a a time where there's an emergency and we go above that. Well, that's where we come back to city council and you allocate some of your fund balance to cover those um needs and components to it. So, we do need to to to make sure that we're we're more in line with kind of the actual components of of where we're at. Um and so that's our first look at it. the other revenue um thoughts that were given there of looking at I think you know the potential of a uh you know a downtown uh like snow removal fee um again that's not a huge wouldn't be a huge amount for us um but we also need to be aware that um you know the state is going to um be faced with some challenges ahead um when we when I talk about that um it's not necessarily in the bi bianium of 26 and 27. Uh right now in the 26 27 um they're looking at a deficit of about $456 million. Um that's a little bit uh of an improvement from their prior estimate. The real problem is going to be in the 28 and 29. Um, right now they're looking at a $6 billion deficit. And that's part of what the governor right now and and the the House and the Senate are are challenging with is that they need to start making some cuts now um to kind of alleviate that that big hit in 2829. We have to we have to remember we all know cuts go downhill. So the rest of the city and then we have to turn around and do the taxpayers. That's exactly where I was going. And one of our biggest um components for us that were at risk is local government aid. Um and you know, and and that's over $1.6 million for us. Um and you remember that there's been multiple years in the past where they've talked about cutting that. Um and then that went away and then in the past few years it's been increasing. Um but that is something that definitely could be you know could happen to us you know and so the question we need to ask ourselves are are we prepared? Um yeah we're prepared right now but we're not prepared if we start spending too much of that surpluses in our in our surpluses meaning you know our fund balances and we put ourselves then we're not ready for that rainy day um component to it and then our only choices are to increase the levy even that much more. We don't want to be in those positions and that's why again right now we're sitting very very well from a financial position but all of that can be changed and distorted in a moment. Um, we also have to be aware, and this was part of the conversation after I called our city manager nuts, that he gave me some of his reasoning behind it. And part of it is is that we're just in really some uncertain times um just, you know, the our nation um and um you know, are there tariffs that are going to be coming and start to increase different costs? Um are they not? What kind of impact they're going to have? Um you know, uh Brian and I were sweating all weekend long. um on this bond issuance that we're we're going to um approve tonight. Why? Because, you know, we're if you looked at this, it wasn't just just the stock market that went up and down. Um it's really confused the heck out of the bond market. Um and that's probably more troubling than the stock market is to be totally honest with you. Um and you can see a lot of experts will say the the the same thing. um it things aren't reacting the way they should. Um when the Feds meet um in in May, more than likely there's not going to be a a reduction in the in the rates. Why? Inflation starting to tick up again. Um so there's so much uncertainty that's happening and it's not just happening in the US, it's global. Um so those are are things that we have to be aware of. unemployment is is looking as ticking up. Um, and so again, that can impact our residents. And so that's where, you know, Brian had come up with 6% the, you know, in his mind was getting to the about the most that he wanted to to see us being at, you know, unless there's some other needs and there's justifications, but that's kind of where we're how he came up with that target component to it. Um, so there's a lot of uncertainty. Um, we were, you know, if you looked at just last week, bond rates went up 50 basis points. That's a half a percent. Allen, just like that. Um, so, um, I'm on the phone with Michaela on Friday and then and talking to Brian. Um, you know, we're we're looking at the possibility of of the interest rates being upwards to a percent higher than we had anticipated for this bond issuance. Um, we were on calls on on Monday. We had to make a decision. Do we pull it because it goes out, it went out today and the sale was at 10:00. Do we pull it? Um we we at the at the uh 11th hour yesterday, we we got a little bit of good news um from our consultant that a sale had gone. Um and it actually got some pretty good rates. Um and so we threw the dice out there and we decided, okay, you know, we're we're going to go for it. Um and uh so we had the sale today and it came back. It came in to where we thought it would come in. It didn't go the high route to it. And so, you know, we'll be making the recommendation tonight for city council to to approve that. Um, but we were faced with, and this is another component, I'm the reason why I'm saying this is this is kind of a reason why we do need to be moving over to that cash basis versus debt basis because we're we're relying on whatever those interest rates are. That 1% change over 20 years amounted to in principal interest, and obviously it's going to be interest um increase of $864,000 on that $6.7 million bond issuance. That's a big change. Now, I look at it and say, you know, we're going to be showing you tonight overall true interest rate what we got. It was about a 4.02. um even at five historically that's not bad. I mean we can go back to you know early 80s and and you can see 14 16%. But what's that type of an impact? um how would we if they start to rise up that high, how do we do 27 bond issuance for streets or 29 um or if there's other needs that we end up having. Um for instance, let's say city council makes that decision and say, "Hey, you know, I want to take care of the Mcnite field and I want to do everything that HGA had said." Only way we could do that today would be going out for bonding. If we were to bond with the uncertainty, what happens if all of a sudden it's an 8%. Well, we couldn't afford it if it was at four. Um, how do we do it at eight? Um, so those are some of the the risks and concerns that, you know, we're moving forward in in in the environment. But, um, the good news is we're positioned very well right now. Um, but what it really means is that we have to continue planning. We need to have and we need to challenge one another. We need city council to challenge us. Um we need to make sure that we're prioritizing things and we're doing the right thing according to our vision for the city um with the resources that we have. Um and yes, uh directly uh Council Member Woods, we do need to look at other revenue streams to make sure um that we're not just so solely heavily so heavily rellyant on the on the property tax. Uh we do need to find some other revenue sources to help offset that. Um it's it's imperative. So on average right now this was 5 something. Yeah. 5.6. Is that kind of like is that going to be like a what we're going to start off on most years? I mean because when you say $20 million in debt, we got to pay that debt and we got to do all this other stuff. So, I mean, is this pretty much going to be, you know, a minimum of 5% because we're I mean, I don't know how much of this 20 million will be able to be bought down. How big, you know, is there any kind of bonds or anything that are coming up that are bigger ones that are going to fall off? Uh, nothing's falling off. We had one fall off this year. Um, but now we're putting one back in. Um, you know, if it gets approved tonight um that uh No, nothing in in a real close um So we can expect peace. Yeah. Um but you know what that really is is so how I have it in the plan if you if you remember when I look at um debt I'm keeping our for our 10-year street plan I'm keeping our debt as if it were the same. Even if it goes higher I'm keeping it the same as long as we levy that 3.25% for streets. Once that debt goes up higher, it just means more of it goes gets shifted to debt and less goes to the streets if that makes sense. So like this past year um on that 3.25% um which you know amounts to you know maybe about [Music] $225,000 because we lost a bond payment out of there about $460,000. I got to take that $460 plus the other and put all of that to streets. So we actually and then there was a little bit more but it was actually like $800,000 that moved over to streets to keep that level playing. Now when the debt in 25 will bring us back to where we were 27 29 will go higher. We still are at that 3.25 um for the street component to it. So at the end of the day, it's not the debt necessarily driving that component because I've got it planned out for the 10 years. It's yes to yes, we're going to be at that 5.6 every year unless we use and that's part of the strategy is that are there some surpluses because the streets um parks um facilities a lot of those expenditures are one-time expenditures or capital expenditures. I mean they're recurring as far as a useful life is concerned but we can then take some of that surplus and maybe for instance if in my plan and I haven't had a chance to get to this point so in my plan if 1% of a levy increase um over the 10 years means that you would have generated I'll say a half a million dollars for sake of conversation a half a million dollars but we have a surplus of a half a million dollars We may be able to lower that part of that 5.6 down as a levy increase. 54 makes sense too because as we do more then you have more interest payments then less roads until either you put more in that levy fund or till we move over to more of a Yeah. till we move over to more of a cash basis. Less and less of Yeah. Yeah. How often do you guys sell off your bonds? Is it once a year or is it right time, wrong time, end at the beginning of the year, end of the year. How do they do that? Um, right now we're on a two-year cycle. That's where 25, seven, and nine are are the years for the bonds that are in included in the capital improvement plan. Um, you obviously to get the work done, you know, the the work can't begin until um road restrictions are pulled. Um, and so you want to be ready to go. Um, you know, May time of the year, April, May, May is usually the time you want to get started. So to be able to get ready for May, you know, this this whole process started last year um with our engineer WSB, starting to do plans um and working with with Ron and Randy um to get the plans on what's the next road that's going to be done and start to get preliminary cost estimates. And then we started the whole bond process to cor to correspond. And you see we kind of timed it out pretty good. Um because uh last was it Monday, Tuesday that bids came in for the roads. Um bids just came in. You're going to see tonight um to award for the job and at the same time you're going to he had a bond sale today to award for the basically the funding for that streets. So, we time things out pretty good, but it's usually going to be in the first quarter of the year for sure that we do that. Um, so it's every two two years. Um, well, right now we got the debt. So, the only way we can do it is to spend more conservatively and budget better because we have to pay that and that is something that we got to do. So, our side, which we've been doing the last few years, is making sure we're not piling on. So, $20 million that we have as debt. How often do we make a payment on that or to drop the debt down or how often do they make payments like this? Yeah. Once a year. So your your regular bond payments are principal and interest are due February 1st and then August versus just interest. Um so basically principles once a year. Um we look um at it every single year based upon interest rates where the bond rates are at. Um if it's hit a certain target like this bond and I think it was council member Nordby had asked on this issuance. Um we're locked into this for 10 years. After end of 10 years we could refund it. So if the interest rates were better than we have now um and you know we can save enough um by refunding it, we would refund it because when you anytime you issue bonds there's there's issuance costs, there's other costs that are associated, no different than if you refinance a mortgage. Um and so we need to make sure that we're going to hit that break even point and then we refund. Um, so we have um and then if we end up having uh enough cash in the in the debt fund for that bond um you know when it's down to about the last two or three years there's a good opportunity that there might be part of the reason for that is because you're required to levy 105% of of your debt payment. Um part of that is that 5% over is supposed to be um you know to make sure that if you have some delinquent taxes that you've got enough money to make your bond payments. But this city has been very good has had very low percentages of delinquencies and property taxes um historically. So there is money that gets accumulated in that um bond fund. And so we've had the opportunity that in the last two years we've accumulated enough money to make those payments that we can pay early and pay off that debt a few years earlier. So in other words, instead of the 20 years we've been fortunate enough to get, you know, sometimes 18 17 years being able to pay off a debt. Um or we'll look at it can we refund to get lower interest rates. In other words, reducing our our interest in and payments. So, has it been below 20 million prior where things keep adding up or are is it on a depletion of the amount that we owe each year that we're paying off? Um, good good question. Until this year, that's been going up. Um and so we just had a bond um that was originally um issued um off the top of things for public works facility. Um it was refunded um because there were lower interest rates from the original um issuance. Um so that one last payment was in February. So we did not levy for that um in 2025. So you levy for in 2025 for the bond payment that's in 2026. So you levy so you have the money at the end of the year to pay it in February 1. Um we didn't have to do that for for that um um issuance grow from all the projects getting the the growth of new places like uh anchor and all that. Is that a lot of the the bonds for the roads and things like that the construction that was done for those places? Um a lot of those are underneath TIFFs. Um, so which is a different one which is a different Yeah. So in other words, part of those taxes are being captured. Yeah. Underneath the tiff to pay off those bonds. Reconstruction. Yeah. For like the new downtown. Yes. Yep. That's where a lot. And that's where a lot of it has been. Yeah. So to answer your question, it had been on the rise up until this year, then it went down. And now with this bond issuance that we just had, barring the approval of city council tonight, it'll bring us back to where we just were. And then obviously 27 to 29 will raise it up again. But again, that 10-year plan has it that you won't notice that because you've been increasing again if you're holding to that 3.25% for streets and 5%. When I first moved here in 96 where, you know, was $1,000, $900 a year, 5% on that. But now the average is like 4,000 probably around here, I would imagine. Yeah. Around 4,000 something for per property. Top of that. Yeah, it does. It it adds up. It adds up. Yeah. Yep. And that's that's kind of the challenge of of where we're at. Um, again, I you've heard me say this, you know, eventually when you're paying cash, you're saving. Um, and that's where that again, you know, and I always use just the rule of thumb of, you know, one uh $1 million at a 5% for 20 years is you're doing a principal interest payment of about 80,000. That means over 20 years you paid 1.6. Um, you just heard me say the example of 1% increase on on tonight's um would have amounted to $864,000. Um, that's how much it can impact. But if you got the cash, you don't have to worry about those things. Um, but at the end of the day, um, you know, we do have uh infrastructural needs. And so we do need to figure out a way to be able to do that. And I think the path that we've started with this planning, I think we're doing an excellent job. Um, and again, the really thing that we need to look at is is, you know, again, there's two sides of the equation. Revenue, expense. um how do we cut expenses? Um we all know what our expenses are. Um so that's open for conversation with city council. How do how do we reduce that um expenditures? Um you know if you look at our general fund um you know you saw the departments when we looked at that you know which departments that there are um you know how do you reduce those expenditures and in in those and providing the same level of service. Um the other side to it is revenue. um what how can we generate more revenue without it being that property tax component and that's a that's a tough one. There's a lot of work that needs to be done with with that voter. Dan, Brian, I I can't thank you guys enough. Um this increase in the bond rating is amazing. Um you guys need to take a moment to pat yourselves on the back, both of you. Um and thank all your staff as well. Um absolutely amazing. So, thank you. Um two questions. um a does this bond rating increase um is there any opportunity there to um uh help with our prior debt? Um it depending on how aggressive you choose to be, is there any room for play there? And B, um when does when do we need to start the conversation? Um if this is something the council chooses to do um on the tax moratorum. Um so when it does end if we choose to for revenue generation. Okay. You have to give me a little bit more explanation on that one. The first one is um does the double A uh plus help us on our current? It could help us on our current again depending on where interest rates of the existing bonds are and where they were. Uh that plus basically says we have less risk. um which means it lowers the interest rate that you would get if that change from where we were at what we would have gotten and the in the market changes enough through an analysis that says we can refund then yeah we could end up then switching that from a no refund to a refund um and be able to save some money from that um and again we look at that um on an annual basis. Okay. Um and so we'll do a review now um just on this past year at being double A+ and where rates are in comparison and see where we're going to end up and see if there's any opportunities. Second one explain a little bit this the sales tax moratorum. Oh yes. Oh sales tax I think. Um yeah that should be ending. Um and so we need to take a deeper dive onto that. Um, usually it's for a, you know, more of a specific type of project, um, that you're, you know, um, generating that sales tax for. Um, so we do need to take a look and start to to plan that, um, and have those discussions. I just want to make sure we're having the conversation at the appropriate time so if we choose to, as a council, we can be at the ground floor of when that moratorum's over. Yeah. And so I think you know this year is the the you know the year I think we need to I think it was uh University of Minnesota extension offers um pretty reasonable services in in doing the sales tax and a number of cities around us have have taken advantage of that and I think we need to end up doing that. Yes. This year you want to say something say you know we did implement a couple of different things this year commercial. Oh yes. Oh, uh the uh uh late payments. So we have implemented some Oh, absolutely. Absolutely. Yes. Good. Good. Good point. Um, I when I became mayor, one of the things I asked from both you guys is the good, the bad, and the ugly on everything. And so I really appreciate that because we need to have everything. And I'm glad we're comfortable enough where you bring it all to us. We need to know it all. We need to understand and uh so it's good to be able to have the frank conversations and understand what where we're at, where we need to be, what's good and what isn't working. So I just want to say thank you to everybody there for that, too. And of course the the double A plus was a was excellent news and thanks to everybody at the city. Everybody did such a great job to be able to get that. So Dan, I don't know the answer but like today correct. That's what I had. Yeah. And is that the same with previously? Um I can't answer that off the top. I definitely will go and look at that. most of them have most most have hit past that 10-year piece to it that are governmental. Um so yeah, so that's what we look at every year to make sure where the rates are and if we can take an advantage of that. Yeah, the rates are consider what the feds put out each day, week, whatever, right? What the feds are putting out. Well, that's a part feds are putting out every day. Yeah, that's well it's it's a part of it. It really is driven by the market, you know, demand, you know, supply and demand. um the the Fed's interest rate is really kind of brings kind of like the bottom. You're never going to see rates go below that. Um you know, so when they were, you know, ratcheting up in interest rates, all interest rates then go up even higher than that. So eventually when they get to the point where they can start to lower it down, again, their target is a 2% inflation is what they've been working at and saying for quite a while. um if we got to that point, we'd see the interest rates going down and then uh the market would then hopefully adjust to that. Again, right now, for weird reasons, the bond market isn't reacting the same way as it traditionally would, you know, based upon the stock market move too. So, we have to keep our eyes on that. But yes, we are are are diligently always looking and analyzing to make sure that if we can save something. Yeah. All right. Anybody else? No. Not. Thanks again. Appreciate everything. Thank you very much. Any other business that you're looking at doing for tonight? If not, I'll call for adjournment. So moved. So moved. Council member Woods. Second. Council member Mackenzie. All those in favor say I. I. I. Thank you. We'll come at 6:30. Good to see you. How are you? Yeah, good to see you. How you doing? Got to go in Thursday.