[06:54:00] **Mayor Elizabeth Kautz**: This is from a different—No, you're a different time in life. Good evening, everyone. [06:54:10] **Unidentified Speaker**: You and MMK are good. [06:54:15] **Mayor Elizabeth Kautz**: It is 6:54 and I'll call this regular City Council work session to order. It is our budget work session. And members of the public are welcome to attend in person. They may also choose to watch this meeting at burnsvillemn.gov/meetings or Comcast channel 16 or 859. [snorts] The public can also participate through Zoom by joining us at zoom.us/join. [snorts] And more information is available on our meetings webpage and in the Council agenda packet. This is a work session and we go directly to our item on the agenda and we have one item on the agenda this evening and that's our financial management plan review. And Jenny Rhode, our Deputy City Manager and Chief Financial Officer is presenting along with Dan Tinter of Ehlers. [clears throat] And so Ms. Rhode, the floor is yours. [06:55:00] **Jennifer Rhode**: Okay. Um, good evening, Mayor and Council. Um, tonight we'll be discussing the update um, the 2026 financial management plan update. Um, Dan Tinter, senior municipal advisor from Ehlers is here to present this evening. Um, we've partnered on this uh, financial management plan I think for about 5 years now. And um, when we put it together, we we take information from um, the 2026 budget for this year as well as some estimates of 2025 information and updates. Um, just a note, we are still in our um, in process with our 2025 audit, so there are some small changes that we do expect um, to occur as as the 2025 information is finalized. Um, but we believe this information gives us a good understanding of where we're at as we move forward with the 2027 budgets. So with that, I'll turn it over to Dan. [06:56:00] **Mayor Elizabeth Kautz**: Well, Welcome, Dan. [06:56:05] **Dan Tinter**: Good evening, Madam Mayor, members of the Council. Uh, and staff. Uh, thank you for the introduction. Deputy City Manager Rhode has mentioned my name is Dan Tinter. I am a vice president and senior municipal advisor with Ehlers and Associates and I'm here to uh, talk about as uh, Deputy City Manager mentioned, something of a spring tradition, uh, the financial management plan for the City of Burnsville. Um, and to some of this was already covered in the introduction, but we're really here to continue the discussion from the 2026 budget process. As you know, it is iterative and ongoing and it almost never ends. We're always talking about budget in some way, shape, or form. Um, we're going to review the financial management plan this evening and also this is of course an opportunity for the City Council to provide any guidance or feedback uh, because this is ultimately kicks off the development of the 2027 budget. And so as we walk through the various funds and some of the property tax calculations, we of course invite any questions or any feedback that you may have. So I probably won't need to cover this in great detail since we've done this for a few years in a row now, but it's just a nice reminder that the financial management plan is really a multi-year fiscal plan for the purposes of the city. It's a 10-year plan, so we look out over a decade and we integrate various things including the strategic plan objectives identified by the City Council, any existing debt, anything included in your capital improvement plans, any future debt, which we'll talk about in a few slides. We model tax base growth, so of course we look at operating costs and we'll go into some more detail about operating costs also in a few slides. Uh, but really what we're trying to do is make sure that all the capital, maintenance, staffing needs, everything is uh, met over time and that it is in fact sustainable. And really what we're trying to do is determine uh, if those costs are sustainable under a certain set of assumptions. And you've probably heard me say this before, if I'm sure about anything about this financial management plan is that it is wrong. Is we are really making an attempt here to, you know, look around some corners, talk about the future, and really give the Council the great sense of the order of magnitude and help you understand the impact that certain financial decisions would have on the financial position of the organization today and into the future. So we look at a total of 15 funds for the financial management plan, uh, but for the purposes of our conversation this evening, we're really only going to be discussing 12 of them. Uh, these the funds that aren't starred, forestry, street revolving, and improvement construction. They're all essentially doing their thing and they're in good shape and while we look at them and do make some recommendations from time to time about ways to improve how they function, uh, they ultimately don't really warrant any airtime this evening because of their financial position both now and over the 10 years that are identified in the plan. Uh, as you know, we always like to talk a little bit about economic expectations. Uh, the financial management plan and the financial operations of the city are certainly do not occur in a vacuum and so we take the time to kind of poke our head up and look around about what is happening both in and around the city both at the state and all the way up to the federal level. Uh, generally the long-term economic projection for the state of Minnesota is slightly improved since last year. You may recall that last year the state adjusted down some of its economic expectations uh, and that resulted in quite a small uh, surplus. Uh, they have now slightly improved those, uh, but they do note in their long-term projections that inflation does remain at or above 2.3% over the next 5 years and in fact, I believe in 2028 it tops out at about 2.8%. Still working in an elevated uh, inflationary environment and that's reflected in some of the assumptions that are included in the various fund analyses. The projected budget surplus though is about 3.7 billion dollars to the next biennium. Uh, but the state also does note that there are several factors that create economic uncertainty. Uh, perhaps most notably on this list, geopolitical conflicts. Of course, the war in Ukraine is ongoing. There is the tentative peace in Gaza and then of course in the last uh, so many weeks here uh, the new conflict in Iran and the various impacts it has on um, the economic status of really the world, most notably as expressed through oil prices uh, which finds its way into all kinds of things related to how the city operates. Um, of course, there have been shifts in federal fiscal policy. And tariffs is always kind of the watchword when we talk about this particular topic. Uh, that has changed a bit over time with recent Supreme Court rulings and then some shifts in how some of those tariffs may function and in what amounts. And then even though the state is not obligated to adopt a budget this year, we still anticipate that will there will be negotiations at the state level in a number of areas, one of which I understand was a topic of discussion at the Council meeting right before the work session. So we will monitor those uh, throughout the financial management planning process and of course make adjustments to the financial projections to reflect any changes in, let's say, local government aid or unfunded mandates or cost-sharing arrangements that the state may expect. The thing to keep in mind here is all of this stuff can ultimately waterfall down to the city in some way, shape, or form and so we just want to make sure that we're keeping an eye on that and helping you understand how that may impact some of the financial decisions the city may have to make both now and into the future. We do make a series of assumptions as I mentioned, I won't go through all of these in terrible detail, but the thing that is probably most notable on this slide is the general fund fund balance requirement. Right now, the city has the adopted policy of 40 to 50% with a target of 45% and then generally anything above that 45% up to 50% can be used um, by the Council for uh, certain activities. Uh, we also model some fund balance requirements for the capital project funds that I'll talk in a bit more detail when we walk through those funds. But more than anything, we make sure that all the capital projects are funded by their respective CIPs. The thing I always like to stress when we put together a financial management plan is Ehlers really makes no opinion about the capital projects that the Council has decided to undertake. That is really a decision for the elected officials and the staff that assist you. We really try to model the financial management plan to make sure we're meeting the revenue requirements to meet those capital projects, operations, and maintenance needs of the organization. Of course, if the Council is uncomfortable with those revenue requirements, then that puts you in the position to make decisions about perhaps what capital projects, programs, services uh, activities may have to change as a result of the revenue impacts. The other thing to keep in mind is we added a number of full-time equivalents based on the organizational analysis that the Council prepared many years ago and then has updated really on an annual basis uh, since that time. Uh, we also make sure that the financial management plan reflects your compensation philosophy at the city and that we do model additional growth within the community from a uh, tax base perspective. And then as I'm sure as the Council is aware from previous presentations, we do assume that your revenues will increase about 2.5% per year, but your expenditures actually increase by about a percent more and that does create something of a budget gap over time where your expenditures tend to outpace your revenues. And we do that in the financial management plan basically to make sure the Council doesn't create any unanticipated budget holes. It's always easier to come back and say, "Hey, we had a little more revenue than we thought. We had a little less expenditures than we thought." It's much more challenging, especially from a Council perspective, if the exact opposite is true. We don't want to put you in a position where we've overestimated the revenues and underestimated the expenditures and have you make some difficult choices uh, in the future because you were relying on this analysis. There's about $150 million in projected debt over the next 10 years and we'll talk about that in a little more detail uh, in a few slides, but that is primarily driven by facilities projects that the Council I know is well briefed on and of course, if uh, you had walked into this meeting this evening, you would have seen one of those facility projects earnestly under construction uh tonight uh and you'll be moving into it in your future here. And then the other thing to keep in mind is the council a few years ago actually went through a rating evaluation process with your credit rating agency S&P. And so this plan generally reflects what we heard from them uh and that is all geared towards protecting the city's AAA credit rating. Of course, you can deviate from that, but generally we received good feedback in that process and so we do try to uh model that in the financial management plan to make sure that uh there is no considerations from a rating perspective. Uh as the council is aware, there are several pending uh studies that are currently underway. The information technology plan was actually presented earlier this year and will be included in uh the financial management plan also as part of your discussions for the proposed 2027 budget. There's a sidewalk and trails plan that's currently pending, park park lighting and security cameras, and then all that lighting that extends on the street, how you're going to handle any city-owned property, and then uh some discussion about the infrastructure trust fund related to some of your streets needs and in maintaining your replacement schedule, also your pavement management scores over time. Uh it is worth noting that you also have a horizontal infrastructure uh plan that is not actually included in the FMP because we do focus on property tax supported funds, not necessarily the enterprise funds. The council does review a utility rate study uh but that actually happens later in the year when you get closer to actually setting the utility rates on an annual basis. So after all that background, let's hop right into the general fund. There are new positions, 7.0 FTEs planned over the next 3 years, two in '27, two in 2028, and then three in 2029. Uh for next year, there's one financial analyst, one patrol officer, and then in the following year, one patrol officer and one police sergeant, and then in 2029, those three FTEs are all uh patrol officers. It's worth noting that the 2027 organizational analysis identified a number of additional FTEs, but there are uh 19 of them in that plan that are not currently included in the FMP and they will have to be the subject of future budget discussions in determining uh when those FTEs uh would be funded uh and how they're funded, and of course uh in what years. The thing to keep in mind here is that if we uh reference the chart through to the 2030, 86% of the new FTEs or really uh six of the seven are funded for public safety and that one government general governmental position is the financial analyst that was referenced earlier. Jumping right into the property tax levy trends, we do know that in 2027, the council adopted a few years ago uh some non-binding annual levy changes, so that is modeled in '27 at 7.69% that does end for the property tax year 2028. Uh also I would note that when you look at these figures, uh much of the debt that has been issued by the city over the past few years, primarily as it relates facilities, is not funded by property taxes, it's funded by franchise fees which the council adjusted last year. Uh and that right now because of the inflationary environment and some of the additional costs considered by the city, there are larger increases in 2028 and 2029. That is also to make sure that the city protects its the financial position of the general fund and brings its uh fund balance or reserve level back to the 45% which is the stated target adopted by policy of the city council. And so those adjustments, you can see the 9.44% in '28 and the 8.08% in '29 are really designed to protect the fund balance position of the fund and then also deliver on those strategic priorities uh much like the FTEs mentioned in the previous slide. You may notice in 2030 that the increase is actually .064% and so we would imagine that as the city moved into '28 and '29, you would probably smooth out some of these levy increases into that third year. It's worth noting though that there are two considerations that will have to be made at that time. One is the impact that it would have on your property tax rate and the interplay that rate has with fiscal disparities and making sure that there aren't any unintended consequences in that area, but then also as I'll mention on the next slide and you'll see um really more clearly in the graph, the fund balance levels do dip to about 42% in '28 and '29, so if you were to delay the property tax increases into that third year, you would likely have to reduce some of those fund balance levels. Certainly could do that, that is at your option, that would of course be a little outside the council policy that's been established to this point, uh but it wouldn't necessarily be something that would be problematic from a credit rating agency perspective, reaching back to my earlier comment about the credit rating evaluation. Uh they just want to make sure that you're returning to your stated goals in a reasonable time frame and we generally find that uh two, three, even up to five years can be reasonable considering the other cost pressures. So something to keep in mind as you move into '28 and '29 and '30 in figuring out perhaps the best way to feather in those levy changes to protect the financial position of the organization. Of course, it almost goes without saying, but I still have to say it, a lot can change between now and '28, '29, and '30 and that's part of the reason that the city has opted to update the financial management plan on an annual basis, so we'll keep revisiting these numbers. [07:11:00] **Mayor Elizabeth Kautz**: Councilmember Kealey has a question for you, Dan. [07:11:05] **Councilmember Dan Kealey**: Thank you, Madam Mayor. I'm just looking at the exact same chart from a year ago in your presentation and um '28 and '29 per—well, '28 was projected at 7.0, '29 at 5.5 and 2030 at 3.2. So in just one year as you as you noted, things can change quick. They already changed. Uh and I love the fact that you're using a very similar presentation because it was 3/25 of '25 that you gave this presentation. And so it's really easy to follow along this year's presentation to last year's, so I can kind of see what changed um from prior forecast, but you know, as we all know and the audience should know, these are just forecasts based on best information. So right now, the best information points to a higher levy um in '28 and actually, let's see. Yeah, in '28 and '29, actually in '27 as well. Does that say 7—Sorry, I'm trying to read it. 7.69? Yeah, it was seven uh before and again, '28, '29, they're they're bumping [clears throat] up. So uh it it kind of points to there's no real relief coming anywhere. It's actually the pressures continued to escalate even faster than they did a year ago, for example. Could you give us a hint as to why that's happening? [07:12:45] **Dan Tinter**: Madam Mayor, members of the council, there's a a few reasons. The first of course is just the general inflationary environment. In previous years, we were modeling a lower amount of inflation uh expecting it to to moderate over time. In some of the funds, we have increased the inflationary expectations um from 2% sometimes to 2.5% as high as 4% depending on the fund itself. The capital project funds tend to have a higher inflationary estimate and that's primarily because we are seeing the cost of construction increase at a greater inflationary rate than perhaps general services uh or other areas. Uh the other thing to keep in mind and uh you mentioned it earlier in in your comments is that the financial position of the city changes from year to year and so we do look at those fund balance levels and then try to adjust the property tax levy accordingly to make sure we're remaining consistent with the council's expectations regarding your fund balance target, which is 45% of next year's expenditures. So as those things change, as the inflationary expectations have remained a little higher for a little longer, we're seeing more pressure on the property tax levy. The other thing to mention uh when you were reviewing the numbers from the previous presentation, we had done a little more feathering across those three years in the previous model. You may recall that you I think you mentioned in 2030, it was a little north of 3% in that year. In this model, it's below 1% uh and that's primarily because we we made the choice in the model to maintain your fund balance level at 42% in '28 and '29 and then get you back to that um 45% level in '29. And so that's why those levies are adjusted. As I mentioned before, the council could certainly make the decision to extend the replenishment of the reserves over a over three rather than two years. You would just have to know that you wouldn't be replenishing the reserves and the potential—how you did it, you could dip below 42% and get closer to 40%. Ultimately, that would be acceptable under the city council's policy because your stated goal right now is 42-50%. We tend to not like to go below 42% at Ehlers for the variation that you just described. Uh we wouldn't want to wake up a year from now and be like, oh, you're actually at 39%, you're now outside of your range because of the very the the variation that occurred over the last year. Now, with that stated, we are still looking into the future, so even if that did happen, you would have time to correct for it. Uh we just try to make sure that there's a little bit of a cushion between your stated policy goal and what we're putting into the model. And that if you wanted to essentially, for lack of a better phrase, fly a little closer to the sun, we would leave that to the council to make that decision, not necessarily bake it into our analysis or any of our recommendations. [07:15:30] **Councilmember Dan Kealey**: Thank you. And this is—you're saying this is actually a forecasted levy for 2030 at this rate if we follow this and things don't move that much. It's .8% levy increase? With all of the inflationary factored in etc. Across the 3 years. Yeah. [07:15:45] **Dan Tinter**: Yeah, approximately. Yeah. [07:15:47] **Councilmember Dan Kealey**: So, it's pretty—It's basically loading up the 3 years prior to that and then giving some relief in that year. [07:15:52] **Dan Tinter**: Mhm. [07:15:53] **Councilmember Dan Kealey**: So, I see what you're saying about we could choose to just not load it so heavily in those leading 3 years and take those down a little bit, but that would put 2030 up. But really this is being driven off of—based on what you're saying—the fund balance. Maintaining that fund balance is—with a little bit of flexibility, but still maintaining it within our stated policy. [07:16:15] **Dan Tinter**: Yeah. Madam Mayor and members of the council, yes, and that fund balance number is also driven by the subsequent years' expenditures. So, that's where the inflation becomes a factor because we need to make—cuz you'll notice um and actually here I'll I'll jump to the next slide because I think that'll demonstrate the point a little better. The fund balance requirements have to go up every year because of the inflationary pressure because your fund balance is a function of next year's expenditures. So, as the city adds staff, expands programs, faces cost pressures from just general inflation and other factors, the fund balance amounts have to go up. And so, the property tax levy becomes a function of those cost pressures expressed as a fund balance requirement and then ultimately what the levy has to change over time in order to meet that requirement. So, a lot of—a lot of moving parts, so to speak. [07:17:05] **Gregg Lindberg**: Councilmember Kealey, Mayor and council, to to Dan's point, [snorts] uh I think I think this graph is helpful in in showing the decision the council has made over the course of the past several years, really since 2022 for the 2023 budget, uh when the organizational analysis was implemented, uh there was a decision to draw essentially draw down fund balances to to policy minimums. And the discussion at that time that as we did that, uh that would offset levy pressures to make investments in police, fire, other city staff, Uh and that at the end of those 5 years, we would have to then address exactly what's happening with the green line touching the blue line in 2027 and 2028, uh with with those the pressure of fund balance being at minimums and then a strategy to Dan's point to to start to bring those fund balance Back to back to uh the the targeted or more ideal space that that really we would need them in long-term strategically. [07:18:10] **Councilmember Dan Kealey**: Right. The graph from your prior year didn't change too much. Um it it does show the um the out years the unassigned fund balances significantly higher um than it was a year ago. What—the green bar was kind of riding the tips of all of those vertical graphs, right? Where here um those—you know, our our fund balance continues to grow year over year over year and and uh that puts some spacing between the green bar, which is I think the minimum. Is that—No, that's percent of total expenses. Got you. As a percent of total expenses, we start to get some some uh some some ground between the total expenses and our fund balance with your new chart. [07:19:00] **Jennifer Rhode**: We did have some additional pressures. One thing that is different is we did add um 10—I think 10 or 11 SAFER grant positions, 10 that are funded by the general fund. And while in the first 3 years of the grant, we do get federal grant funds for those, the city does have to take the full impact of those positions on in years, you know, four or five and beyond. And so, that is creating a little bit of pressure to—additional pressure that would be different from a year ago at this time. [07:19:35] **Councilmember Dan Kealey**: And is that—what year does that going to first show up at? [07:19:40] **Jennifer Rhode**: 2023. Um so, it's probably going to show 28, 29, you know, when some of that pressure—And we made—we made efficiencies as part of the budget process last year, but it is—it is something that is creating some additional pressure in those later 3 to 4 years. [07:19:55] **Councilmember Dan Kealey**: It kind of looks like there's a bump in that expense line in '29, from '28 to '29. There's a tick up and then it kind of remains pretty flat from there. Is that likely where the absorbing all of those salaries, 100% comes? Yep. Yep. Thank you. Well, I mean I like to see uh at least a 3-year trend on—on even the predictive numbers. Uh but it's not like the predictive markets though, uh but uh just to just to see really how things are changing when you go through and you recalculate and you put together um just how much movement there is from one year to the next. To your point, it can change over a couple years or in this case it could change quite a bit in just one year. And I think you're—I understand your rationale is inflation ended up being a lot more of a problem for a lot longer than what a year ago or 2 years ago—2 years ago it was forecasted to be, right? So, you can—you can start to settle in on a 2 and 1/2 or 3 and now it's not going to be there. [07:21:00] **Gregg Lindberg**: Councilmember Kealey, Mayor and council, I think it's also important to reiterate Jenny's point that uh there was significant investment over a 3-year period of time in taking on those SAFER grant positions in the fire department. Uh that was—that was significant unplanned expense that—that that will need to be operationalized by 2029 uh when the full freight of those positions goes from grant funding to local funding. [07:21:30] **Councilmember Dan Kealey**: That's a really good point. I just want to close out it. The majority of our budget is public safety. Yeah. Um fire and police and because of the call volume uh growth of high single, low double digits down and then year over year, it just it doesn't let up and our population's aging, there's a lot more calls for service, um and that's the reality that every city is going through. And um I think people mostly—general public responds to why is my levy going up so high? It's because we're investing a lot more in police and fire because we need it on both fronts. Our—our the types of calls have changed and the call volume especially for police for fire and paramedics just continues to go up a ski hill. Um and that [clears throat] there's—there's really, you know, we're not going to compromise uh and save money by cutting back on safety. Um and at least I don't think we—we're planning on doing that. Pretty—I can safely say that's a pretty consistent comment from our—our council members that uh and so, when you have the majority of your budget increasing at that kind of rate for all the right reasons, there's—there's not much relief in sight. [07:22:45] **Mayor Elizabeth Kautz**: No. And to your earlier point, most of our expenses is in personnel and the highest police and fire. Yeah. [clears throat] Okay. Dan, back to you. [07:23:00] **Dan Tinter**: All right. Thank you, Madam Mayor. So, moving in to the impact on the median valued home, it's worth noting for our analysis, uh we use a median value of $356,500. So, in 2027, uh based on the levy changes that were discussed on the previous slide, we'd be anticipating about $138 a year or about 12 bucks uh a month and then or you know, 38 cents a day. Uh 2028 is a little more as we talked about, so that's about $189 and in 2029 about 172 and then as those levy increases kind of moderate over time, it averages out to about $98 a year uh through the balance of the projection. And then right now we uh spoke with Dakota County and got some preliminary payable 2027 uh market value. So, if we look at the taxable market value, so this—these are the amounts that are actually used to apply the property tax levy, uh we can see that about 1.88% overall increase, so right around 2%. Um that's fairly consistent with what we've included in the models in previous years. We've kind of bopped between 2% and 3% for tax base expansion uh over time. And then if we look at the estimated market values, this is the total value, uh that's about 1.71%. So, again, generally consistent with what we've been seeing uh in the model over the past few years. Uh you may recall in some previous iterations of the model, we actually did some sensitivity testing on the tax base and actually looked at two, three, four, five, I think all the way up to um 10% if I recall correctly about the base. But generally, we find that you do have years where it goes up a little more, goes up a little less, maybe there's a little shift in the base, but kind of over time, 2% seem to 3% seems to be generally what we've seen in price appreciation for taxable and estimated market values. [07:25:00] **Councilmember Dan Kealey**: [snorts] Big change from a year ago. Residential going down, commercial up, industrial going way down. Uh as a percent increase, sorry. I'm referring to percent of increases. It's a—It's a different table every year, but uh— [07:25:20] **Dan Tinter**: There have been some—Madam Mayor, Counselor, there have been some shifts over the uh last couple of years, especially after we saw the large increases in residential properties after the pandemic. The market has kind of been sorting itself out. And then of course the shift uh to some of the work from home has put pressure on some of the commercial properties. That pendulum seems to be swinging back a little bit now. So there's a little more expansion in the commercial properties. And the residential properties seem to have kind of returned to some of the more typical year-over-year increases we would expect. So looking at all the overall capital projects uh right now about $327 million in projects planned over the next 10 years, so through 2036. Uh that does exclude the $26 million or so in additional costs that is budgeted in 2026 for uh the police city hall project. You may recall that the council made the decision to kind of split the two bond issues for that project since it was uh a larger amount and the project was going to take a few years to complete. Uh and so we have recognized kind of some of those costs in different years. Um It doesn't include any of the utility funds as I mentioned earlier. And then in fact if you look kind of by fund uh to build on a previous slide, facilities makes up the uh really plurality of the projects, $150 million. And in fact though if you were to take a deeper look at facilities, which I'll do here in a few slides, but 114 million of that 150 million is actually two facilities, almost $40 million for fire station number two and $75 million for the maintenance facility. Uh which is that large turquoise bar that you see in 2033. [snorts] So. So kind of moving fund by fund, we look at the infrastructure trust fund, just under $21 million in projects planned over the next handful of years. Most of that uh almost $20 million for street improvements. Uh it's worth noting that between 2031 and 2036 we have estimated project cost uh we put in a placeholder of $5.4 million per year. We're adjusting that by 1.5% annually. The thing I would stress about this slide and we mentioned it uh when we were discussing the pending studies, we do anticipate a lot of this to change based on the infrastructure trust fund plan. We do know that the council has heard from your engineering staff about the need to spend really more on the city's infrastructure uh through this fund. Uh that's a function of both the cost of street projects and a desire to basically replace or tend to more of the system on an annual basis and that will result in some additional costs. So um very much this fund will be a function of all of the excellent planning that the city has done over the last few years. And of course as you know, once you make those plans and have all those wonderful ideas, the next question that gets asked is how you're going to pay for it. So certainly we would imagine to reach back to Council member Keeley's point uh that this fund will look much different uh probably in the FMP next year after you've completed the infrastructure trust fund plan and made some decisions about how to use these resources to meet the needs of the community. [07:28:45] **Gregg Lindberg**: Madam Mayor, members of the council, just [clears throat] a a reminder for you and for the community. We're planning to come back to you in the May work session uh to present that infrastructure trust fund plan. Uh work is continuing on that plan to help inform the conversation that Dan has has mentioned. Um if you recall, uh that plan really came out of our discussion of the pavement management plan about a year ago uh to to start talking about how address challenges uh against Dan's point related to the ITF, to the infrastructure trust fund uh and talk with the council about potentially new strategy around um how we might address some of those ongoing funding challenges. [07:29:40] **Mayor Elizabeth Kautz**: Okay. [07:29:45] **Dan Tinter**: So looking at the fund over the next 10 years, uh it's worth mentioning that the council may recall when the initial decisions were made in 2023 to make some uh significant investments uh in staff and other projects, the property tax levy that actually directed this fund was reduced and the city actually issued some debt to support some of the projects. And now the city has been loading that property tax levy back in over a few years in order to protect the financial position of the fund. It's a strategy the city has used in the past to meet its needs and respond to property tax pressure. Uh so that will be built back through 2026. It's worth noting that the MSA uh funds tend to vary and they've been averaging around $1.2 million annually. It's maybe a little less than what we've seen in previous years and so that is reflected in the long-term projection. And you can see really in 2027 the the fund is actually really right at its fund balance requirement. The council may recall that this fund balance requirement, the $2 million, is actually set by city ordinance. Uh and so that is reflected here uh as as that red line. Uh but generally the fund is performing okay given its current cost pressures. You can see that at the end of the 10-year period although it does dip below the fund balance requirement, it does return above it uh at the end of the projection, which is always our goal when we're performing a financial management plan. Uh but as mentioned in the earlier slide, there are some additional costs that are contemplated for this fund. And so we do imagine that all of this will change. I would say that it's even possible that the council may revisit the fund balance requirement for this fund in the light of the additional costs that will be considered as a part of the infrastructure trust fund plan. [07:31:30] **Councilmember Dan Kealey**: Madam Mayor. Yes. This is another example of one year makes a huge difference. Last year's presentation only had 2 years, 2021 and 2029 where we fell below the 2 million. In 1 year we now have almost every year except for a few falling well under the 2 million. Uh to to Greg's point, we got a—we got a serious problem brewing with the ITF. Yep. Franchise fees. Not to make it too simple, but think things are—are getting older and more expensive. [07:32:05] **Dan Tinter**: Yes. Yes. Yes. And that is—that is the challenge. [07:32:10] **Councilmember Dan Kealey**: I am too. Yeah. [07:32:12] **Dan Tinter**: Yeah. We all are, yeah. Can relate to that. We're asking for Chili's instead of Chipotle. I mean that's an upgrade to me. So moving to the facilities uh capital project fund, uh about $55 million of projects planned between 2027 and 2030. Uh it's worth noting you see police city hall there with a couple asterisks, $168,000, but again that's in 2027. That doesn't—that doesn't reflect the current outlays planned in 2026 for the ongoing construction of the police city hall project and the remaining portion of the borrowing that will have to occur. So we tend not to look at the current budget year since the financial management plan is forward-looking. Uh but since those numbers are quite material to the this fund, it's worth mentioning in our conversation this evening. Uh as I noted in the previous slide, almost $40 million for the fire stations—that those right now are occurring uh in 2029. I do know in our conversations with city staff uh that that project may have to move a year depending on the operational needs of the fire department. And of course the council will have conversations about that in the future as both part of the operational discussions related to the department and then the budget process and then of course the planning for the project itself uh in the near future here. But right now for our modeling sake it's still in 2029 which is where it was reflected in previous years and consistent with the council's current plan for the phasing of those three projects, police city hall, fire station number two and the maintenance facility. Uh but right now when you look at the facilities capital project fund, 72% of all of the costs planned through 2030 are for fire related services. So much to Council member Keeley's point earlier about the general fund and most of the costs going to public safety that also is consistent here uh over the next handful of years related to facilities. [07:34:05] **Councilmember Dan Kealey**: Yeah, there's a lot of similarities to that 72%. Um I just wanted to talk about that—that shift because of our funding through the franchise fees is on a schedule. Are—BJ, are you looking to move it up a year sooner or push it back a year? From—from whatever the original plan— [07:34:30] **Fire Chief B.J. Jungmann**: Two. Fire station two, the goal was to make it operational in 2029, which would mean we'd need to start construction in 2028 which I believe is what we've kind of planned all along. I think it's floated between 29 and 30, but I I think all along 29 has kind of been the the goal for it to be operational. And now as we start to back into the timeline to make that happen. [07:34:55] **Councilmember Dan Kealey**: Sure. And you—you referenced 2028, but that's probably from a financial management standpoint um putting the money in place, etc. The impacts— [07:35:05] **Dan Tinter**: Madam Mayor, Council member, Right now the way the model works is we are showing the outlays in 29 and then the debt service would begin in 2030. Uh but I think to the question you were raising Council member Keeley, the way the capital project fund is currently set up and the fees related to the debt service, those are also proposed to be adjusted when the debt service would begin. So again, the—then that means the franchise fee adjustments would potentially have to occur a year earlier as well. In order to make sure that you have appropriate cash flow to service the bonds. Right. [07:35:45] **Gregg Lindberg**: Madam Mayor, members of the council, one of the last conversations the council had had about the facilities funding strategy through utility franchise fees was to potentially consider annual increases to those franchise fees to kind of step into some of these near-term projects, which then also would—would kind of change the the reality to both payers and—and the revenue the city's bringing in. So those are conversations that—that we're planning on bringing back to the council in the May work session to start introducing the fire—reintroducing the fire station two project and getting the council's direction and on what those next steps and timing should look like. [07:36:25] **Councilmember Dan Kealey**: Did we—just a refresher, did we vote to actually do the steps? I—That's the way I remember it, but I— [07:36:32] **Gregg Lindberg**: Madam Mayor, members of the council, I—I have not taken the time to go back and look specifically, so I don't want to give you an incorrect answer. If memory serves, there was at least council direction that that was perhaps preferred, but I'll go back and—and and recapture council direction. It's something that I've talked with staff about accomplishing and we'll get you that information. [07:36:55] **Councilmember Dan Kealey**: Okay. Well, Considering it's—it's a funding source [clears throat] and assuming it does step up every year based on when we anticipated the fire station two, [snorts] how the police city hall comes out, the funding, where we're sitting, if we have to shift it up—shift it up 6 months or a year, it may or may not trigger an adjustment in that step-up program. Just depends on how things come out when we get a little bit closer. [07:37:30] **Gregg Lindberg**: Madam Mayor, members of the council, that's a good point. And there are a number of factors to consider when we think about the the financing strategy of the fire two project in particular. If you recall, um the council did uh um uh decide to um include portions of the the design process of fire two in the police city hall funding package. Uh so there will be a number of factors for us to consider. Uh frankly, project performance on the current police city hall project is—is also something that we're going to want to consider over time. Again, that's going to be a matter of timing and how that all works out in terms of where we're at with the project by the time we would go into another project, but clearly factors we'll want to consider in strategy that we'll want to talk with the council about in terms of direction on that. [07:38:15] **Councilmember Dan Kealey**: Thank you. I think for the people watching, whoever they are today or maybe in the future watching the replay on YouTube or the city web—the website, I mean this is—we're really referring to a very very large project, a—a hulk-size capital project that comes around every 40 years. And so I don't want to talk about it as if it's just nothing, right? Or if it's just oh yeah, it's just here or there type of thing. It is a big project and um it is—it is a significant project to manage from city staff's standpoint. Uh obviously have a lot of vendors and and third-party resources that are helping manage the project, manage the construction, but it is a lot of burden on the city staff finance leadership to be able to get through something like that. It's—it's a lot different than—pardon—pardon me, Mark, with no disrespect, a couple million dollar road project. This is—this is a $98 million project and it's very dynamic and it has three phases. It causes disruption to city hall during the process and I don't know what our surveys have said, but it seems to me like city hall is been functioning pretty darn well. I haven't heard a single person say anything about I'm having a difficult time getting to access to support for—it's like—it's like that massive project out there is having no effect on the consistency and the support that the community is receiving from this building and the and the people are—that are working in here. So compliments to that. That's—that's fantastic cuz there's a lot—lot of work's been going on the last year and will continue and obviously affecting PD when they move out of their existing space into some temporary space. That's a big disruption to that department. So I just don't want to sort of refer to this project as—as if it's just another thing that you do every day or every year. Uh it is extraordinarily unusual and—and it is going to set the city up and support our city for the next four decades and it's absolutely the right way to do it. I'm very happy that this was a um—I—I think unanimous vote to do this. Maybe. Uh but I know that there's unanimous support that it needs to be done. Yes. There you go. Is that phrasing it properly? [07:40:40] **Gregg Lindberg**: Thank you. Madam Mayor, members of the council, I think it's an important opportunity to recognize that there are many staff who are putting in a lot of effort to make sure that the community is well served. Customer service, Councilmember Keely as an example, is something that we're focused on not only through the transition and the disruption of a very significant to your point project happening uh on this campus, uh but we're also spending a lot of time thinking about what does customer service and day one operational excellence look like both on the police and the city hall side of the project. Uh and that's—that's taken an entire team. Uh also think it's important to recognize that the project team, our construction managers, and our architects have um been incredibly efficient and effective on the on the financial management side of the project. We're on time, we're on budget. Um uh a project of this scale, we—we would anticipate uh with a $5 million contingency over—over the course of a month to potentially spend in upwards of $100,000 in change orders. Right now, after 8 months, we've—we've totaled after I believe 51 executed change orders on the project, something like $12,000. So there's an incredible amount of efficiency in in time and effort that's gone into managing this project well. Clearly, we will have change orders in the project and and we will spend project contingency, but efficiency and effectiveness along with that—that level of service has been very important and very much a team effort. [07:42:15] **Councilmember Dan Kealey**: Thank you. [07:42:16] **Mayor Elizabeth Kautz**: Okay. Dan Tinter, back to you. [07:42:20] **Dan Tinter**: Thank you, Madam Mayor. So moving into the facilities capital project fund projection and I think to the question that was raised earlier, the way this is currently structured and it's consistent with guidance had the council provided after we completed the franchise fee study is there are annual increases in the franchise fees and then larger increases in the years that the debt service would come online for the individual projects. Uh and that I think to the council's credit was in recognition of the fact that the fees will have to go up in that year and by phasing it over a series of years, it's less of a large increase in individual year. Um it's worth noting that that big gray bar, those are the unspent bond proceeds. So when we look at the end of the year, you did borrow $73 million uh for—for the first uh series of bonds to support the project costs that was mentioned by the city manager and those are basically held. They'll be spent down and that's why basically that bar goes away because you're actively doing the project right now. It just happens to be that you're holding them at year end while you spend down the proceeds over time. Um— [07:43:30] **Councilmember Dan Kealey**: Can I just—There's a little difference in a number that I'd like to ask about. Uh last year we forecasted the maintenance facility at 80 million um and it's now down 10 million, which is great news. I just want to understand why. Yeah. I mean it's—it's a—it's a really positive number. Maybe it'll go down more, but I don't know where those numbers came from and 10 million is a pretty big swing. Yeah. [07:44:00] **Dan Tinter**: Uh Madam Mayor, members of the council, I would have to defer to staff to answer that question. [07:44:05] **Jennifer Rhode**: Okay. I'm sure about the cost change. Um I as I look at it, it could be in part just recognizing that we will have some additional funds on hand um that could go towards that last project, um but I would have to look at it. We can— [07:44:20] **Councilmember Dan Kealey**: Got you. Because you're—this is a bonding number, not necessarily the total project cost number, right? Okay. Okay. That makes sense. Well, that's still good news. [07:44:30] **Dan Tinter**: Definitely. So Madam Mayor, members of the council, something to keep in mind that right now, if all of these projects were to move forward uh in the current years, the total debt service that would be supported by the fund and the franchise fees would just be right around $17 million. Uh the other thing to keep in mind is that as we get to 2036, the fund has about $20.7 million in excess fund balance. And you may sit there and ask yourself, well, wait a minute, like there's an extra almost $21 million in the fund. Doesn't the fund have too much money in it? But the thing to keep in mind, and this is something the council talked about when the franchise fee study was completed, is that right now, over the 11 years, so last year when the project—when the police city hall project began through 2036, this fund will support $243 million of capital projects. Uh so really when we look at that additional $20 million, we're talking about less than 10% of the total outlay. And so I think the council made a very purposeful and wise decision to structure the fund understanding the—the cost of the projects and the generational impact that they would have Councilmember Keely's point and the fact that we are trying to look out over a 10-year period and so we wanted to make sure that there were sufficient resources to meet the needs of the community in the years that they would occur. And the other thing to keep in mind that which is already talked about is that in order for these blue bars to become reality, the council would have to move forward each of the projects and finance them with franchise fees and make active choices through individual ordinance actions to adjust those fees. So, even though we're making projections over a 10-year period, there are a number of touchstones the council would have to have in order to make this graph a reality, but based on the latest and greatest guidance that we received from the council both in the last financial management plan and the franchise fee study, which explored three different options for this fund, that's what's baked into the model here this evening. Of course, a lot of it can change over the next decade. [07:46:35] **Councilmember Dan Kealey**: So, we're in—very good point. I'm glad you pointed out that fund balance being so high in those out years after we've succeeded the—the support for the three major projects that are baked into here. Um that—that sort of when I was looking at last year's chart because it's a little closer and easier to see than this year's chart, uh 2035 was—was showing a little over 25 million. And I'm thinking, okay, we're past you know, absorbing the cost of—of the three the third project by then. That is a substantial balance. So, I I appreciate the explanation. [07:47:15] **Dan Tinter**: Madam Mayor, members of the council, the thing to keep in mind and it was raised by the deputy city manager is you could certainly use some of that cash to apply for project like projects in later years. Uh there certainly could be other projects that could be supported by the fund. Uh and not to bury the lead, we'll talk about maybe some of that in a few slides. And then of course, uh you could always adjust the fees over time to manage the balance requirements much like you do with the property tax levy. [07:47:45] **Councilmember Dan Kealey**: Yep. Thank you. [07:47:47] **Dan Tinter**: So, we move into the equipment and vehicle fund. Right now, over the next few years about 8.8 million dollars for fire, 4.3 for police, spending 5.5 million on streets, 3 million on parks, and a few other areas spending about 617,000 dollars. And then we have included a placeholder of 4.6 million dollars uh in the out years, which generally reflect your historical average. Right now, and maybe you may feel a theme building here. You spend about 60% of the equipment costs on public safety needs in this fund. Uh so, it is following some of the trends for the other funds that you could see. Uh there's about 1.4 million dollars for a rescue pumper and then 1.75 million dollars for a fire engine in 2029. When we look at the fund over time, you can see that we are recommending the property tax levy increase 3% in 2027 and then really through the balance of the model at 6% annual increase and that's to reflect the equipment needs of the various departments. This fund uh does look maybe a little better on paper right now because there are larger cash balances and that's generally due to the fact that uh there is significant lag time between when you order a vehicle and when you actually pay for a vehicle. And so, that is reflected in the planning of the fund itself, but not necessarily in this chart. So, you may ask yourself, we have all these large balances, that's because you're placing orders for things like fire trucks and ambulances sometimes years in advance and you don't really make full payment on them until you take delivery. The other thing to keep in mind is the fund right now is supported over a 10-year period by more than 9 million dollars in borrowing and so, that's also reflected in the fund as—as well. 1.4 million for the rescue pumper and ambulance, uh 1.2 million for a loader and a class 7 truck, 1 million again for an ambulance and a dump truck, and then in 2029 2.3 million for an ambulance uh and a fire engine. Uh of course, uh as you'll see kind of over time, we'll have to make adjustments to this fund based on when those outlays actually happen, when those vehicles are ordered, and the borrowing in this fund could certainly change because there are some hard and fast rules around how long you could hang on to bond proceeds. Uh the deputy city manager and I have had many conversations about that making sure that you're not backing into any problems with any of your tax-exempt financing. So, that's really a long way of saying that this fund does have some timing challenges associated with it given the lead times of some of these vehicles and when they have to be ordered. And of course, the ever-increasing costs of equipment, especially fire apparatuses. [07:50:40] **Councilmember Dan Kealey**: Sorry, I have another question. [07:50:42] **Dan Tinter**: Yes. Yeah. [07:50:43] **Councilmember Dan Kealey**: Council Member Kealey. I love numbers. Um this chart last year looked really rough. Like by 2035, the fund balance is basically at the minimum. Yet 1 year later, the fund balance looks like it's—I mean, it is dramatically better. And you have the same recommendations of 3% and 6% for the same number of years. Um and the same potential bonding. What do you think? Did we save money? Did we not buy things or change our mind on some things or change our—our strategy cuz this—this chart from 2028 goes all the way down to under 2 million by 2035. And—and that one drops, but it stays significantly above our recommended minimum balances. It looks to me like in the last year, our planning in this particular bucket of funds really changed. Almost like we didn't decide to buy what we thought we might have. We bought—you know, thought we might be buying right? [07:51:50] **Dan Tinter**: Madam Mayor, members of the council, as—as mentioned on the slide, the—the main difference is the—the larger cash balances really do are those lead times of those vehicles. So, when we look at the fund and we look at the financials, we see that the fund has cash in it, but it doesn't have the outlays yet. And in the model, we don't have the carryovers built in. We could certainly go in and adjust all of it and you would see that these balances would come down because you'd start writing million dollar checks for the vehicles that you're currently waiting on. [07:52:20] **Councilmember Dan Kealey**: Yeah. So, is—does that mean this chart is legit or is last year's chart closer to what's going to happen? Yep. [07:52:30] **Dan Tinter**: Madam Mayor, members of the council, it's—it's certainly legit. Uh the challenge really is timing in trying to figure out when these vehicles are going to show up and when the cash will actually leave the fund. We can certainly make adjustments in individual years and make some guesses, uh but lead time for some vehicles can be two, three, four years. And often times, although you can make payments uh right away and realize a discount, uh the city to its credit has done the analysis and figured out that if you hang on to the fund, you can actually earn more in investments than you would take on the discount buying the—buying the vehicle right away in full. Um so, the nice thing to know and I think to your point, Council Member Kealey, is that this one is a little tricky. It's a little difficult to kind of understand what the ins and outs are going to look like in an individual year, uh but ultimately from Ehlers' perspective, the fund is performing well given the borrowing that is currently anticipated in the fund. Um certainly we could include the encumbrances and the carryovers. It would change things a little bit. Um reflect more the—the graph from last year, but ultimately it's two ways of kind of looking at the fund. This one is more reflecting the—the amount of cash that it currently has. [07:53:45] **Councilmember Dan Kealey**: Okay. Okay. Yeah, it is a—I mean, we're talking material difference. Significant material difference. [07:53:50] **Mayor Elizabeth Kautz**: Going to go to Jennifer and then to Council Member Gustafson. [07:53:55] **Jennifer Rhode**: Yeah. Um Madam Mayor, council members, we also made a change in this fund uh for the landfill fees that we collect. Previously, we did split them between the facilities fund, parks, uh parks renovation, and the equipment and vehicle fund, but we did make a change um that we made permanent in during last year's budget process where the facilities fund is—is well funded through franchise fees. And so, um to kind of uh bolster both parks and equipment and vehicle funds, we did just decide to um split those landfill host fees between those two funds as well. So, equipment and vehicle got a bigger— [07:54:35] **Councilmember Dan Kealey**: They got a bigger share of that revenue permanently. [07:54:40] **Jennifer Rhode**: Instead of—I think we initially had done a—a 3-year um kind of temporary fix um in the in the 2025 budget, and then for 2026, we made that change permanent. So, they go down and more money. [07:54:55] **Dan Tinter**: Yeah. Madam Mayor, members of the council, to—to this deputy manager's point, if I would just read my own notes, I wrote additional include additional revenue for host fee agreement and average about 1.4 million dollars annually over the projection period. [07:55:10] **Councilmember Dan Kealey**: Yeah, that's going to dramatically [laughter] change this chart. Okay. [07:55:15] **Gregg Lindberg**: And and Madam Mayor, members of the council, that was—that was part of the strategy. And I would—I would also say that there has been a significant shift in the past 2 years in the planning, the intentionality of planning, and the thoughtfulness of managing the vehicle and equipment fund Yeah. most effectively. Uh that's been informed by even recent conversations that—that we've had uh here about um our our fleet study as an example. Uh and I would say that there is a—there's a new discipline in the management of this fund in addition to the the council's direction on different revenue strategy that you're seeing reflected here. Um and that's not to say there aren't future discussions about this fund. There are still significant challenges when it comes to the city's vehicles and equipment. Uh and in—in frankly, one of those conversations that—that inevitably will need to have uh more strategically is—is what is the appropriate amount of debt to be using for um uh this fund in particular. So, I believe that this chart in comparison to what you might see from last year's presentation of the FMP reflects kind of the the first step in in managing this fund perhaps differently than we have in the past and there are still future strategic conversations at least for my perspective that I think are going to be important for the city council to discuss over the coming years to—to to really best manage the city's debt strategy longer term. [07:56:50] **Councilmember Dan Kealey**: I agree. [07:56:52] **Councilmember Dan Gustafson**: Councilmember Gustafson I'm trying to remember my question now. Just—just kidding. Sorry Councilmember. So this fund is actually showing committed funds on orders that we've already placed. Is that right Dan? [07:57:10] **Dan Tinter**: Madam Mayor members of Council that's my understanding yes. [07:57:12] **Councilmember Dan Gustafson**: Okay, thank you. [07:57:14] **Mayor Elizabeth Kautz**: Okay. Explains the extra money. Over the last many—you know last couple decades I think this fund has had more changes in how we fund it. It's gone through three or four iterations of how we—how we're going to fund it right? Shifting from here to there and now last year we made a decision to give it a healthy boost and it's now showing up in the fund balance and maybe that'll stay or to city manager Lindberg's point it might change again. Yeah. Yeah. Well the study on equipment and vehicles really help inform a lot of this too. [07:57:55] **Jennifer Rhode**: Yeah. Additionally I think as we developed the 2025 budget there was a need to really kind of right size those vehicle budgets and it did create a lot of pressure in the fund. I think generally speaking staff has—as—as city manager Lindberg mentioned staff has been managing those budgets and being very you know intentional about that and—and we've had some budget savings too. I mean—not—not large but you know we're—we're those budgets are right sized and so we're not having overages and more unexpected things. We're kind of—we have a better plan for the—for the future. So I think that's also impacting where we're at today. [07:58:35] **Gregg Lindberg**: Yeah better oversight better—better management better reporting. And that's delivering real operational results to the community. As an example we're starting to see from my perspective better—better management of the police fleet as an example. We're starting to see those replacements happening in more effective ways. We're seeing better use of equipment in the public works operation not only replacing existing equipment but thinking differently about what equipment we're replacing and how and that will just—that will lead to a stronger fleet and operational position and our ability to deliver better results across operations. [07:59:15] **Mayor Elizabeth Kautz**: Okay. Okay, back to you Dan Tinter. [07:59:18] **Dan Tinter**: Thank you Madam Mayor. So moving into parks renovation the council may recall that I believe it is now a year ago the—or two years ago as far as fiscal periods are concerned the city split the parks fund into a renovation fund and an investment fund. So for renovations right now planning about 12.3 million dollars over the next handful of years about 6.3 million of that outlay is really to replace and improve courts parking lots and trails and then about 4.1 million is for playground replacement. So the balance of the fund essentially being used to replace or otherwise maintain park infrastructure that the city currently possesses. We much like the other funds include a placeholder of about 2.1 million dollars a year and we're adjusting that by an inflationary factor annually. Again that's based on your kind of historical averages. Here if we look over the next 10 years 3% increase in the levy annually. It's worth noting that this renovation fund can be used for any capital projects. We'll talk about the difference in the investment fund in the slide here. But right now there is no bonding that is currently planned and the fund does remain above its fund balance requirement for the duration of the projection in 2028 it does flirt with it a little bit but it still remains about 168,000 dollars above the fund balance requirement in that year. Much like was mentioned with the vehicle fund this does also have host fee agreement revenue and then again averaging about 1.4 million dollars annually over the projection period. But ultimately no bonding is currently planned for the fund. You may recall from previous iterations for some projects there was some bonding that was contemplated but that hasn't happened now for a few years. [08:01:25] **Councilmember Dan Kealey**: A bit what notable last year we had 7.7 planned for capital I think it jumped at 12. Was that in your previous slide? 12.3 for the—the three year period. We added almost 5 million in more park renovations which for those of us who've taken a park tour over the last 10-15 years this is the right thing to do. Yeah. [08:01:45] **Mayor Elizabeth Kautz**: Well especially—It's like city hall is—was we were you know we were aging and outgrowing it and band-aiding it and throwing a few million here and there and wasting our money unfortunately but we're—we're—we're taking care of some way overdue needs in our parks. [08:02:05] **Councilmember Dan Kealey**: Well I I like all of the studies that have been done that has informed these decisions because we really saw not only visually but we also saw it in data with regard to our parks and where they were at all these assets. [08:02:20] **Mayor Elizabeth Kautz**: And we just made some investments like tonight on some of those. Yes, it's noticeable when you have five or six parks all getting full renovations it becomes very noticeable and I don't know when the last time we've done that. On as since I was sitting on this dais I don't remember doing that level but it was way overdue. Not any very intentional planning strategic look at all of these things from parks to fleet and everything else to even our to the earlier points that we talked about even our um personnel I mean police have not been full complement since 2016 and now we do have a full complement in police where we haven't had and so we're doing a lot of great things and all of these things cost money but it's the delivery of service to the community is what's important. We're doing what they expect of us to do. [08:03:20] **Gregg Lindberg**: And Madam Mayor members of the council staff deserves a lot of credit for taking the council's vision. We have a—we have a robust leading parks plan that—that we have staff who are now working incredibly hard and collaboratively to implement changes that make a real difference in service delivery and the community experience. You look at several million dollars in change in the parks renovation fund Councilmember Kealey to your—to your earlier point that—that's significant investment and the previous investment was significant but it's because of that plan and the coordinated effort across parks recreation public [snorts] works parks maintenance that we're—we're making some very noticeable differences in the system and that was the what the parks plan was intended to do and that's why we'll keep doing it. [08:04:15] **Mayor Elizabeth Kautz**: And I want to also thank our community who participated in some of the vision for each of the different parks that are on—on the books this year and all of those people that showed up to help plan those parks remodel and upgrades so it's a good thing. [08:04:35] **Gregg Lindberg**: Another good reminder that over the course of the next two years we'll complete the rest of the—the system so there's individual visions for each park. As we continue the work of taking care of really what the parks renovation fund is all about and in why we bifurcated these two funds in the first place was to make sure that we were focused on taking care of what we have and how do we manage and maintain the system not only in short term but in the long term and there's still decisions the council will need to make in that regard but that's we're—we're already seeing noticeable differences in the system experience. [08:05:15] **Mayor Elizabeth Kautz**: And the two things that came out in the survey that our community really want us to focus on—public safety and parks. Those are the—and—and—and we're investing and we're saying okay this is what you really want but we were ahead of what they had also shared with us during the survey. So— [08:05:40] **Councilmember Dan Kealey**: And a lot of that park equipment was 30 years old 20 years old. [08:05:45] **Mayor Elizabeth Kautz**: And Dan can speak to that and this evening you even made some improvements in how that's going to be placed on concrete. Well all of the benches and the making them ADA compliant so that people can enjoy it and they have a smooth way of getting to those picnic tables and benches and so yeah. Okay Dan Tinter back to you. [08:06:10] **Dan Tinter**: Thank you Madam Mayor. Don't you just love our financial planning management plan because we get into everything and the community gets to experience what we're going through here. Madam Mayor as you may have heard me say before I always like to joke that the—the budget is about everything so the conversation can be about anything. [08:06:30] **Mayor Elizabeth Kautz**: Which is great. Yeah. So I'm going to borrow that one. [08:06:35] **Dan Tinter**: What's that? I'm making a note. There go. Um so the park investment fund, this was as mentioned separated a couple years ago to really identify the park dedication fee balance. You may recall when we did the financial management planning exercise a few years ago, it was a little confusing because we would have the as you may have saw in the previous slide the two bars that showed the dedication balance and the—and the renovation balance and trying to figure out what was going to be used for what purpose. The staff and the council I think made the excellent decision to separate the funds. So only park dedication fees go into this fund and it's worth reminding that they can only be used for— [08:07:20] **Mayor Elizabeth Kautz**: Excuse me, Madam Mayor. Uh park dedication, last one was '23. Park dedication, then we don't have park dedication fees to fund the the renovation. [08:07:35] **Dan Tinter**: Correct, Madam Mayor. So you—you can't actually spend the park dedication fees on renovation activities. That's right. Uh and to I think to the point you're making and we'll talk about in a second here, the park dedication fees tend to be episodic. You don't get them on a regular basis and so it can be difficult to fund kind of ongoing needs uh and improvements [snorts] to the park system provided of course they meet the eligible costs. So to that point, they can only be used for the acquisition or development or improvement of parks, recreational facilities, playgrounds, wetlands. They can't be really used for any ongoing operations, maintenance, or regular or deferred maintenance. And so ultimately I think to the point you're making, Madam Mayor, separating them, identifying what money's can actually be used to service the existing park system and respond to the pressure that you were hearing from the community about the desire for improvements in parks and the them being one of the top two services of interest of—of the public, uh this goes a long way in helping the council understand the financial impacts and the resources you have available to deliver on the plan that was mentioned earlier. So right now improvements about 161,000 and then some technology and security improvements that are right under 400 grand. We do have a placeholder much like the other funds of 200,000 that's adjusted annually. As you can see here, uh the park investment fund as mentioned began in 2024. So you see that beginning balance that came from the park renovation fund. Right now we are assuming $100,000 in park dedication annually, but to the point raised earlier, there's no guarantee that that will happen in any given year. But we do know that we do when you have larger developments, they can—can still pay a park dedication fee. And what we would actually probably end up seeing is larger deposits into this fund in individual years. To kind of recognize that, we have averaged it out as $100,000 year over year, not trying to guess at when some of those larger payments may occur. Um the thing to keep in mind here, there is a pickleball pickleball park project that is currently planned in 2025. Excuse [clears throat] me, that will occur in 2026, but it has not started yet. It is currently at basically a little under 1.2 million dollars. And so you can see in '25 to '26 the fund balance dip a little bit there to reflect that amount. Um the funds do decrease gradually over time and then that's basically to reflect that placeholder adjusted for inflation annually does kind of outpace that $100,000 that we've recognized in the fund year over year. But it generally remains stable. This is one of—this fund doesn't generally have a fund balance requirement. We could certainly include it, but again, it doesn't have a lot of activity, it doesn't have a lot of revenue. It's something that you would probably use on a case-by-case basis. It's more of a facts and circumstances funding source. [08:10:45] **Councilmember Dan Kealey**: Well, I'm glad you brought this up because I'd like to revive the discussion of back when we got 1.9 million from waste management um from the landfill. Um we talked about different ideas of a capital project uh that would meet the needs of our community. And one of them that I had put forward was—uh and I'm not saying this is the only thing I'm interested in, but um a futsal soccer facility within one of our parks. We really haven't talked about that for a couple years. It's sort of fallen through the cracks or you know, we've been busy with other stuff, but I would like to have that discussion uh before we watch that 1.9 million just sort of evaporate into other things. Um I—I would like to revisit the conversation of what new amenities do we want to see in our parks in addition to the pickleball, which is already part of this plan. [08:11:45] **Gregg Lindberg**: Madam Mayor, members of the council, Councilmember Kealey, to your point, the last time that we had talked about additional investments in parks, staff had asked the council to allow us the time to get through 2027 in the—in the parks envisioning process, which is kind of the completion of the parks plan. And—and yes, Councilmember Kealey, to your point, there has been some time since that last conversation and now and certainly through 2027. So if the council wishes to entertain a conversation about additional investments in the system, we certainly can do that. Again my—my ask or my caution to the council would be allowing us the time to get through the community engagement, the envisioning process to complete the parks planning discussion to make sure that those investments are going in places long-term that—that best meet the communities' needs. So that work continues and certainly we would take any direction the council would want to give us on additional investment projects in the meantime. [08:12:45] **Councilmember Dan Kealey**: Are you suggesting that we plan for the discussion sometime in 2027? [08:12:50] **Gregg Lindberg**: Um Councilmember Kealey, Mayor, council, the—the current plan is during 2027 we would complete envisioning for the remaining parks in the system. So certainly we—the council could have that conversation in 2027. It will—it will be late 2027, early 2028. Um really the 2028 budget process, right? That we would be—that we would be better prepared to have those conversations. [08:13:15] **Councilmember Dan Kealey**: All right. I would just like a date certain so we can get our arms back around that. I think we had some robust discussions and um you know, I know the envisioning is going to include hopefully will include a cross-section of our community and so we get the feedback. I mean I—I know from all the research that was done to bring up some ideas on how we could spend that um parks investment infusion uh is—is you know, the idea of the futsal is a reflection of the fact that our diverse community plays soccer. It doesn't play basketball, baseball uh to the degree that it did 20 years ago. And so we don't really have— [08:14:00] **Mayor Elizabeth Kautz**: Futsal and cricket are the ones that we heard about. [08:14:05] **Councilmember Dan Kealey**: Yes. So I just think we—I want to make sure that we follow through on that. Those are discussions from a couple years ago. [08:14:15] **Mayor Elizabeth Kautz**: Wouldn't it be also good to hear from the community in terms of the need? Yep. Okay. Back to you, Dan. [08:14:25] **Dan Tinter**: Thank you, Madam Mayor. So moving into the IT capital fund for the next 10 years, the largest outlay really right now in 2026 is a new ERP system for the city. So enterprise resource planning, it's essentially your financial system. The city has had the same system for quite some time and a couple years ago, the vendor actually notified the city that it was done selling the system to other clients, which in the world of information technology and software is usually indication that they plan to stop supporting it in the near future. So as you can see the large drop between '25 and '26 reflects that almost 3 million dollars for the ERP system. Much like your other technology that touches some of your enterprise funds, there are transfers in from those other funds to help pay for a portion of that because obviously the water utility, the sanitary sewer utility, the other enterprises, they benefit from that financial system, so they do pay something of a proportionate share. Uh 4 million dollars in capital projects uh right now, we are planning about a 12% increase in the property tax levy between 2026 and 2028. And then in 2029 through the duration of the model, 6% annual increases to support the fund. And as you can see from the slide, it does basically ride at the fund balance requirement '27. It does dip then below until about 2031 when it returns above in 2032. Uh the thing to keep in mind here is if the council wanted, it could issue equipment certificates to actually support the software purchase. Uh but ultimately the plan does not include it because as you can see uh from the projection, uh it does build some balances in by the end of the projection period in 2036. [08:16:30] **Councilmember Dan Kealey**: Madam Mayor Yeah. This is another case of you know, I'll show you your chart from last year where the—the tail end of that stays flat, but you've got a dramatic spike in fund balance. Is there uh from our finance—our CFO, is there another change in the revenue or the infusion of—of source of funds into this fund that are—that is actually fueling that growth in the balance? [08:17:05] **Jennifer Rhode**: Um certainly we've—we knew um this fund, you know, has been kind of—in the out years, we knew we had some—some years where we—we the fund balance did dip below what we—what our target is. And so certainly we looked to kind of shore up that levy in that fund to make sure it's appropriate. So some of it is just making sure um kind of year to year making sure that levy is, you know, helping to—to get us to an appropriate—appropriate um balance as well as kind of considering the levy as a total, right? So, you know, kind of where do we have some room to make some additional shifts here. We've—We've looked at that in this fund, and I think as far as technology goes, um things change a lot from year to year in terms of just, you know, as we look at the CIP for IT equipment, that tends to experience more change maybe than some of our other, [snorts] you know, longer-term assets. And um so, that—that can also have an impact. I think um as we look forward to the facilities project, certainly some new—new um capital assets are part of—are part of um this fund, but some are part of the project. And so, we, you know, we've definitely fine-tuned that to make sure none of those things were in our CIP for this fund to make sure we're not duplicating anything. Um additionally, we've taken advantage of some leasing um for some of the uh IT equipment that has really given us some favorable cost—um cost uh benefits as well. So, but I would say definitely as we look at this fund, when we look at year-over-year capital um needs and how they shift, they do tend to change more rapidly in this area than they do in any other. So, that can happen just as, you know, things shift. [08:19:10] **Councilmember Dan Kealey**: Yeah, my concern when I look at this graph is that '28 and '29 and we have fire station two rolling in, and there's going to be a lot of infrastructure uh IT infrastructure that's not only completing this—a police and um—and and city hall, but also fire station two and then we'll—and and uh then we have the maintenance department, which is—It's going to come up in 20 31 or so. [08:19:40] **Jennifer Rhode**: Madam Mayor, Council members, certainly um as we get closer to those projects, those project budgets become more refined, but certainly a lot of the technology that's needed for those individual facilities will be part of that budget. I mean, certainly there will be some that will be part of the IT capital plan, but um just as we have here in the police city hall project, um a lot of that new um kind of those new technology needs will also be planned as part of those projects. [08:20:10] **Councilmember Dan Kealey**: Yeah, because tonight wasn't in the '26 budget and we're looking into '27. And I see that '28 and '29 we don't have much of a— [08:20:20] **Jennifer Rhode**: And those were—fund balance in—Those years were low in previous ones. They're just a little bit lower in this current projection. And certainly if that trend continued, that would be very concerning, but we also see that we are um kind of growing fund balance back after the 5-year window. [08:20:40] **Councilmember Dan Kealey**: fire station two rolls in in '28. [08:20:42] **Jennifer Rhode**: Correct. And I remember— [08:20:43] **Jennifer Rhode**: Oh, not all of the fire station infrastruct—IT infrastructure will be funded out of this fund. It will be funded out of the project. [08:20:55] **Councilmember Dan Kealey**: And that is— [08:20:57] **Mayor Elizabeth Kautz**: Okay. [08:20:58] **Jennifer Rhode**: Jenny, yes. [08:20:59] **Gregg Lindberg**: Jenny, I think that's an important point, right? Because actually married to your question, uh there's the potential that that—those large-scale facility projects actually relieve pressure on this fund as opposed to potentially add it. Uh so, uh I think that's a—an important point. [08:21:15] **Councilmember Dan Kealey**: Okay. [08:21:16] **Gregg Lindberg**: think there's a—a tremendous amount of variability in this fund, particularly in the past—in the recent past planning years, as we've identified the need for a finance ERP system, a—kind of the whole the city's wholesale software system, uh and a project team works on making um um incremental and efficient and effective decisions about—about what that investment needs to look like. So, there's the—kind of—there's the—there's the significant kind of uh previous existing fund balance that—that—that yes, we know there's a significant project to invest in, uh and we're going to invest those dollars wisely, which might dramatically change the even the short-term planning uh in this fund. So, uh there's some—there's some opportunity there, too. [08:22:05] **Mayor Elizabeth Kautz**: Okay. But it's good to know that um the project will cover in '28 and '29 fire [clears throat] station one. So, it's not coming out of this fund. It's going to be wrapped into the project cost. Okay. Okay. Yeah, Council member. [08:22:25] **Councilmember Dan Gustafson**: Just a quick follow-up. That I was kind of a comparing the two and much like those other charts where there's a piece of data that's not represented on these charts, it might be very helpful to have a footnote on these—on any new funding changes, that kind of stuff. So, so when we are looking at over a 2-year or 3-year period, there's a rationale or an explanation why this one is $2 million higher than last year's. It looks as if we're ramping up for something that we're anticipating to spend in 2037 maybe or '38. Is there a—an intentional build-up in the balance dramatically $2 million higher than it was just a year ago planned in these out years? Is there something that we're saving up for? [08:23:25] **Jennifer Rhode**: Yeah those—as in terms of those last 5 years, I don't know that there's any specific thing. We certainly do know that um technology, you know, our needs in—in terms of technology um do change. Certainly as we get closer to that period, if we see we're still building up fund—fund balance and we don't have needs, we would adjust that levy, you know, pressure. So, certainly we have time. Um it's always nice to see it going up rather than going down because at least we know we have a balanced, you know, we have a balanced plan and that we—we're able to fund our needs. Um but even just changes in, I mean—uh as we look at um you know, IT and even what um our IT director presented in the capital plan, cybersecurity and some things. Things are changing quickly, so we want to be able to respond to those as well. But again, as we go out, if we continue to accrue fund balance that we don't need, we certainly adjust those levy um— [08:24:25] **Councilmember Dan Kealey**: It's basically following a trend of 2021 through 2024 in anticipation of a big expense in 2025. And then we kind of cruise along the bottom there, then we start building up again. Like there must be a purpose for that much money being accrued. [08:24:45] **Jennifer Rhode**: And certainly we will plan for that and— [08:24:48] **Councilmember Dan Kealey**: Yeah if there isn't, then we need to adjust it now. [08:24:50] **Jennifer Rhode**: We can address that. And we knew—We knew we were ramping up for this big ERP project. And again, timing, we're—we're really being intentional about um you know, that expense as we go forward. Um we expected to see the fund balance really take a dive for a couple of years, and it has—um you know, we've seen the—the rebound definitely. So, if that continues, we'll adjust that funding downward if we don't need it. Or if there are other identified needs, those will come through in the capital plans. [08:25:25] **Councilmember Dan Kealey**: The other recommendation I would make is—what I'm doing tonight is something that I do as a practice in business, and I think it—I've always liked doing this, like having last year's—and I've done it a few times. Sometimes it's hard to find. Um you know, last year's chart and be able to follow along. I appreciate, Dan, that you're actually putting a presentation together that is consistent from slide to slide, you know, like—like what each slide in the order that you have them is following along with last year. So, that kind of continuity is very helpful for us when we're looking at it and trying to find out why is certain things look the way they do, right? Or why did the forecast change so dramatically in just 1 year. But it would be nice to actually have that in the presentation. Like the past 2 years. So, we can see some sort of trend line. It could be just smaller charts below, you know, there your main chart for the current year, but then [clears throat] it would visually you'd see what I'm seeing and you'd ask the same questions that I'm asking. [08:26:45] **Gregg Lindberg**: Madam Mayor, members of the Council, I—I understand the request, Council member Kealey, uh and I think it's important to remember that the FMP, much like the budget, uh is a snapshot in time. Uh there are significant and dynamic changing factors that happen. So, certainly we—we maintain those presentations. They're available on our budget landing page. Um—uh in—in some of the comparative conversation, absolutely is helpful. Uh and those significant changes make that apples-to-apples comparison a bit challenging, um—uh particularly in the nuances of—of—of particular funds. So, we can look at—at what some of that comparative analysis might look like for us, but I—I think there's also—uh potentially a—a challenge in—in year-over-year just comparing the FMP at a point in time. And Dan, you might be able to help me out more with that, but just a thought by way of comparison from my perspective. [08:27:50] **Dan Tinter**: Dan Tinter. Yeah, ma'am mayor members of the council, yes, the—the presentation is a snapshot in time and we make a series of assumptions and they change year over year. We can certainly include some more information about what has changed perhaps significantly, maybe some bullet points from year to year if there are large changes. Multiple graphs, um we've attempted in the past. Uh they tend to get—the slides tend to get very busy, very difficult to follow. There's a lot of information. Um sometimes they can actually serve as a—just a distraction from the conversation of the evening. So, I think the points well taken that the city uh now has a rich history of these projections and we can talk a little bit more about what we were anticipating and how some of that has changed. And I think we can put some thought into how the presentation could be modified to meet that goal. Um I wouldn't want to go so far—uh and this is just my knee-jerk reaction—as to trying to put like a side-by-side comparison to each—each slide. I think that could be—I think that could be pretty challenging and—and really quite unwieldy. Um I know I have worked with clients in the past where we would just furnish the copy of the last year's presentation as a part of the materials so you would have it handy in much the way you have it now. [08:29:15] **Councilmember Dan Kealey**: Yeah. Yeah. Um I think there's a few different ways we could kind of try to figure that out. Okay. Well, I—I would just—I think I'm not looking for small nuances. I—There's a lot of adjustments that are pretty minimal. I'm just looking for the dramatic ones where there has to be an explanation as to why the forecast in this case has a fund balance of $2 million higher than it was just a year ago, what we thought it was, right? So, there's a reason for that and it's a big enough number that it's substantial and material and should have an explanation from my perspective. [08:29:55] **Dan Tinter**: Yeah, ma'am mayor members of the council, I—I agree. I think we can—we can include some of that when we have kind of large deviations in the way that you're describing that are either um in their in the dollar amount significant or perhaps even in as a percentage of the funds activity significant. Yeah. So, moving into the cable uh franchise fee fund. So, the council has certainly seen this one before. Uh as we know, with the cord-cutting phenomena, the cable franchise fees have been decreasing over time and we've in fact been modeling a decline of about 4.25% annually. Uh the council may recall that in 2023, and actually to help uh stabilize this fund, the city allocated about $500,000 per year in personnel costs away from this fund to the general fund. And even that adjustment over time has not been enough to save it from the downward trend of its revenues. So, when we look at this one, this slide's a little different. That orange line is not actually uh the fund balance requirement. It is the transfers in and out of the fund from this fund to the general fund. And you can actually see in 2027 uh to 2028 it actually dips down and the general funds start—starts having to transfer money into the fund in order to maintain the solvency of it. And in fact, when we add it up over the entire duration of the fund that's—that's reflected on this chart from 2022 2020 2036, that's actually about $1.6 million of transfers in from the general fund. And so, ultimately, the city will really have to consider the best way to handle this fund. You certainly have to segregate the monies into a separate fund because you are getting them for a legally restricted purpose, but it's probably at some point in time the city will have to consider ultimately having the general fund take on more of these activities or modifying the operations that are supported by the fund itself because really once you get into the point where you're just transferring year over year into a fund from the general fund, that really is now a general fund expenditure. Uh and you should really save yourself the accounting hassle and ultimately the operation of the fund becomes less transparent to someone that were to pick up your financial statements and try to figure out what's going on with this fund and why. Um you've got a little time to figure it out. It's not to say that you have to do it right now. Uh but ultimately you will have to settle this fund every year in cash anyway, so you should make some—some changes to it. [08:32:45] **Mayor Elizabeth Kautz**: Yeah, because this graph really represents what's happening right now in comparison to last year's graph. Uh yeah. It's—It's got worse. Yeah. Well, we've seen the decline and because there is a lot of competition out there with regard to cable. Sure. I mean—We don't have a big fee for the streaming devices. Yeah. [08:33:10] **Dan Tinter**: But ultimately, the goal was just to maintain a stable balance over time. That's why that blue bar doesn't change. So, it's just a static amount and then the transfers in and out of the fund just become a function of maintaining that fund balance. [08:33:25] **Mayor Elizabeth Kautz**: Yeah. Agreed. Yeah, I think it's inevitable. [08:33:30] **Gregg Lindberg**: Yeah, and—and we believe that's a reasonable plan right now uh—uh for this particular fund. [08:33:40] **Mayor Elizabeth Kautz**: Yeah. Well, we're—This one really tells the story. Tonight's graph tells the story of where we're at with cable franchise fees. [08:33:50] **Dan Tinter**: And ma'am mayor members of the council, I certainly don't want to make light of several hundred thousand dollars, but if you look at this graph compared to some of the other ones, the scale we're dealing with here is significantly less than some of the other funds. So, while it certainly is a you know, {quote} {unquote} problem in terms of how the fund is operating, financially it is not as consequential as the other funds that we're talking about this evening. [08:34:20] **Mayor Elizabeth Kautz**: But still—something—still— [08:34:22] **Dan Tinter**: True. brings to the attention of the council cuz you will have to make some adjustments to it likely in the near future. [08:34:30] **Councilmember Dan Kealey**: Just to note, our forecast for the last year was all the way out through 2035 was to keep 400,000 in and there were transfers about the same time to keep it there. Now you see it we dropped down to about 170,000. [08:34:50] **Dan Tinter**: Yeah. Um just to maintain that balance, we have to feed it. [08:34:55] **Dan Tinter**: Yeah. And part of that ends up—ma'am mayor members of the council, ends up being a function really of the overall property tax levy because those general fund transfers are coming from your general fund reserves and then we need to adjust the levy in order to make sure—make sure you're maintaining those reserves at the appropriate amounts set by the council as we talked about earlier in the presentation. So, um as you move money around, it does have tails all the way back to the property tax levy. [08:35:30] **Mayor Elizabeth Kautz**: Yeah. Okay, moving into um some of the enterprises, the ice arena over the next 10 years. It is—It's operating revenues are currently covering its operating costs. I think as we've shared with the council in the past, we do these for a number of communities that have ice arenas and that's not always the case. Sometimes they do have an operating subsidy. Uh we are still recommending that the fees increase 3% annually basically to maintain the position that it still covers its operations. But the thing to keep in mind is that it is supporting about 1.1 million of its own capital projects, but the franchise fees and the facilities capital project fund are supporting about $1.8 million of capital projects over the next 10 years. So, while the fund is performing well from an operating perspective and it's still able to make significant investments in its needs to the tune of about $1.1 million, it's still getting the better part of $2 million from another funding source. And so, ultimately, if you were to try to operate this fund as its own enterprise, it could not support its operations and its capital over time. That's not necessarily a bad thing. Many communities look at these facilities much like they do parks and understand that they'll have to make an investment in them in order to make sure that they operate and meet the service level expectations that are expected by the council and demanded by the community that uses the facilities. Uh the thing to keep in mind is that uh the drop in the working capital between 2028 and 2029 is due to a main office renovation of about 117,000 and then there's some additional flooring that will happen in that year that's about a half a million dollars. Uh but much like we see in funds and you've seen in some of the other capital project funds, it's not uncommon when you have larger outlays to go through a few years of savings followed by some spending and then a few more years of savings. And so, you can see here uh the fund spends it down and then accrues some capital and then would likely then spend it down again uh in a future year. Uh it's also possible that if you wanted to with some of those uh out-year reserves or working capital amounts, you could potentially have the fund pick up some more of its capital activity, some of that 1.8 million that's currently supported by the facilities fund. Potentially, the fund can take a little more uh if you wanted to. It really depends on uh the individual project, the year, and of course as the uh financial position changes over time. When we look at the Aim Center, uh this is similar to the conversation we had last year with the council. The operating revenues currently do not cover its costs. We are assuming annual fee increases of 5% a year and we are aware that the naming rights decreased to $50,000 down from $150,000 beginning uh in 2029. Uh there are currently about $800,000 in capital projects that are supported by the fund. Uh but again, much like the Aim Center, there's about $3 million in capital projects that are in fact supported by the facilities fund. Uh the large drop between 2026 and 2027 in terms of the uh ending cash is related to uh lighting conversion in the facility that's almost a $600,000. The other thing that I would mention, and I'm sure the council is aware, uh but that currently any outstanding debt service related to this fund is actually supported by the property tax levy and not supported by the enterprise itself. And between 2026 and 2027, there's about $3 million in debt service remaining on those bonds. Those bonds do mature after 2027, but between the current capital projects that are planned for the fund over the next 10 years and the current debt, there's about $6 million that is being supported by other sources outside of the fund itself. Uh and so ultimately, given the ending cash position and as it decreases over time, the city will either have to identify additional funding sources uh or consider operational changes to the Aim Center, or it may even have to say that the additional capital projects that are currently supported by the Aim Center fund in fact need to be supported by the facilities fund. So, when we talk about some of those uh excess quote-unquote excess fund balances in the franchise fee fund, the facilities fund uh that could potentially be used to support some of the costs that are in the enterprises. Uh both uh in the Aim Center and in the golf course, which we'll talk about in a second here. [08:41:00] **Councilmember Dan Kealey**: Yeah, Dan. What's the reason for the drop to 50,000 in the naming rights? Which one is falling off or ending, I guess. Do you know? [08:41:10] **Jennifer Rhode**: Um the the Madam Mayor, Council members, it's the $100,000 from Aim I think that is scheduled in 2028 is the last year we have an agreement with them. So, that— [08:41:25] **Councilmember Dan Kealey**: Which one from the first million dollars or the second 500? The second 500 agreement. Yep. And then the other last year we had 2 million in capital and 4.3 from capital's fund that dropped to 800 and 3 million. So, pretty big drop. Did we finish uh like a about a million dollars in capital projects between last year and this year for that number to drop from 2 million to 800,000? [08:41:55] **Jennifer Rhode**: Um it could be—I I'd have to look, but it could be some of those that we finished, some may have shifted over to the facilities fund, or just timing changes um could happen. So, there is—there is some shifts that happen in capital as a result, but we do look at um the types of capital expenditures and what might be appropriate for the facilities fund and what—what is more appropriate for the Aim Center fund. So, there is some changes that do happen. [08:42:25] **Councilmember Dan Kealey**: It's like both of them went down. I first thought maybe it was just a shift, right? Um out of the capital into the facilities fund, but the facilities was 4.3 million, it dropped to 3 million. Capital expense or capital projects was 2 million, now it dropped to 800. So, it just seems like a lot of stuff got removed or—or completed, right? [08:42:50] **Jennifer Rhode**: It's—it's a combination, I would say. Things get completed. We also take a look at the condition of the assets and prioritize, hey, what—what—every year sometimes there are shifts in this—something may, you know, decline in condition faster than something else. And so, we do—we do take a look at that to make the—the best use of funds that we can. [08:43:10] **Councilmember Dan Kealey**: Did we have any big projects with the capital—with the Aim Center in the last year? Was—like the roof for something needed to be needed to be replaced that was probably around a million bucks? [08:43:25] **Gregg Lindberg**: The most significant project, at least off the top of my head, is HVAC equipment chillers. [08:43:30] **Jennifer Rhode**: Yeah. correct about that? some HVAC. Um I'd have to look at the list. I don't know if if finance director Ryan remembers. We do have to take a look at the list, but we're always rebalancing the projects based on the funding available as well. So, there was a lot of rebalancing the projects between the years, especially with the facilities standing being finished and some other things about what—what—they all the funds across the board can handle. [08:44:05] **Councilmember Dan Kealey**: Got you. I understand that from my HOA board days of shifting that 30-year capital projects around. Each year you kind of adjust a few things. [clears throat] Thank you. [08:44:20] **Dan Tinter**: Moving into the golf course, the current operations operating revenues cover, but again, much like the other two funds, they're quite not enough for capital needs. So, we have assumed an annual fee increase of 6% annually. There's about a million dollars in capital project that this fund is covering. It does not include about $426,000 in funds supported by the facilities capital project fund. It's worth noting that the that includes $180,000 for irrigation improvements in 2026. And so, much like the Aim Center fund, you may either need to increase the fees, uh subsidize them more at the property tax levy, or assign more of the capital projects from this fund to the facilities capital project fund. Uh but it does have some challenges. The—The nice thing here is it does start to rebound in 2036 as those 6% year-over-year increases in the in the fees uh for the golf course uh compound on each other. So, there is a little bit more of a turnaround in this fund, but over the next decade, its capital requirements—it essentially can't fund them to meet the working capital thresholds for the fund itself. [08:45:45] **Councilmember Dan Kealey**: What does a round of golf cost by 2036 at a par three? That's the—exactly what I was thinking. I—like, what is that—when is that going to hit that point where people are going, this is getting so expensive, I may as well go to Legends. I mean, that's a bad comparison but— [08:46:05] **Dan Tinter**: Madam Mayor, members of the Council, I'd—I'd actually have to look at the worksheet to see what the—the amount is. We could—I don't need an exact number. I was—No. metaphorical. Yeah, 6% year-over-year is—it's going to climb over the next 10 plus years and it's a small you—municipal par three course. So, I'm not sure what our base starting is cuz I haven't played there. But um that could get spendy and I wonder what kind of community pushback we'll see with that kind of hike. [08:46:35] **Dan Tinter**: And Madam Mayor, members of the Council, to—to that point, you could certainly, as the—as was discussed earlier with this slide, consider moving some of those capital projects that are currently supported by the fund to the facilities capital project fund, and then it wouldn't need to raise as much revenue in order to have the working capital necessary cuz right now it's covering its operations, just can't support the capital projects that are currently planned in the fund. So, uh if you were uh under the theory that the public would become price sensitive at a certain point over time, you could—you—there is something of an off-ramp that the city could realize with the facilities fund, much like it already is doing. It would just be more of a shift to that fund. And we do know right now in the long-term projection, the facilities fund does have the capacity to take on those additional costs. But again, that would require Council direction. [08:47:35] **Councilmember Dan Kealey**: Thank you. [08:47:36] **Jennifer Rhode**: I would also add to that as we get into the budget process, individual budget preparers are analyzing their fees and taking a look at, you know, what—what—are—what are other cities doing, what's the market for that. And so, certainly we take that into account um as we set fees during the budget process. [08:47:55] **Dan Tinter**: So, moving into the EDA fund, over the next 10 years, we have a $700,000 in the property tax levy in 2026, and then we're planning to increase it $50,000 every year starting in 2027. So, right now the fund accrues balances primarily because it's only supporting about—annual operating budget of around $300,000. This is intentional on the part of the Council, really trying to provide the resources for the EDA to be a more active project partner and giving you the reserves necessary to realize some of your strategic goals related to economic development. Primarily, if the city were ever to want to acquire certain parcels in the community and take a more active development role. The Council may recall there have been discussions in the past about acquiring certain parcels and having the city be more the driver of certain developments, or at least the—to put you in a position to have a say in the development that would occur, but in the past, the city did not have the resources to do so. So, it would either have to use other funds or potentially borrow money in order to acquire property. And so, this plan right now in the financial management plan really helps the city accumulate the reserves necessary to make those decisions cuz as you know, uh in the world of real estate, often times you have to make decisions very quickly. You don't have the opportunity to wait years to have resources build. Uh and so, this puts you in a much more advantageous position over time. Uh and it also puts you closer to some of your peers in terms of the economic development resources that you would have available to realize your strategic goals. Uh the one thing to keep in mind is this currently doesn't include any new program costs. So, if you were to use some of these resources for ongoing operational needs, new programs, uh of course, the fund balances would go down over time as you accumulate additional costs to the fund. But right now, given those planned levy increases, it would increase about 8.2 million dollars in fund balance between 2027 and 2036. And then potential bonding, we've talked about this kind of piecemeal across each of the individual funds in some of the discussion earlier in the presentation. The thing to keep in mind is that uh right now of the $157 million in borrowing, 131 million is for facilities, and this chart actually doesn't include the 70-73 million dollars that the city issued in 2025 for the first tranche of funding related to the [cough] city hall project. Really outside of those facilities projects, there's relatively modest borrowing needs over the projection period. So, the city is managing its costs well across equipment streets infrastructure and facilities. The thing to keep in mind when we look at the improvement construction fund borrowing, we didn't talk about that fund specifically this evening, but it does show up in your borrowing plans because the city does borrow the special assessment portions of those projects as you extend financing to property owners that use the assessment approach for their portions of the project. And then as I mentioned, we are currently showing the borrowing and the cost related to fire station number two in 2028 and soon in 2029, but that could move to 2028 pending further discussions of the council with respect to that particular project. So again, just a reminder, we kind of started here with the impact on a median valued home as we worked through each of the individual funds and you've seen the individual property tax recommendations and again for 2027 would be about a $138 increase. The thing I would actually note is that a good portion of the increase is actually attributed to the increase in the value of the underlying property. If you in fact held the property's value constant, the increase would be about $79. So, some of it is of course attributable to the increase in the value of the residential homestead, not just the action the council takes with respect to the property tax levy. And so, I always think that's important to note. Of course, uh they still have to pay it regardless of the source and so on, but I do like to point that out that there would be some increase as a result of the increase in the value of a property. So, in 2028, again $189, 2029 $172, and then as the property—as the property tax moderates, $98 a year on average. Again, the median valued home we were using was $356,500. So, in conclusion, uh the FMP update responds to the city's direction of the city council. I think as the council's talked about this evening, many of the plans that have unfolded over the last so many years have now been incorporated into the financial projections of the city, and those are all designed to respond to the needs of the Burnsville community, but then also allow the city to protect its financial position both now and into the future. And as you know, some of these issues took years to address, and from a financial perspective, it can take years to handle them as well, and I think that's reflected in the plan as you see year over year some of the impacts of the decision making. And really trying to balance the financial needs of your city and priorities. We would note the non-binding property tax levy change that ends in 2027, and there is limited property tax support for the debt that's currently included. Most of it, as mentioned on the previous slides, is related to facilities, and that's supported by your franchise fees and your facilities capital project fund, not your property tax levy. And as always, we say that you should monitor the various balances of the fund over time and update the financial management plan on a regular basis. Which of course you already do. And as some of you know, I am uh—[laughter] I'm now a new father. Our daughter is—Our daughter is 7 months old. And so, I have been very interested in the caffeine content of various beverages as I deal with an infant overnight. And so, in case you were ever wondering—[laughter] and he needed a little jolt. [08:54:20] **Councilmember Dan Kealey**: Last year you were interested in regional giraffe patterns. [laughter] [08:54:25] **Dan Tinter**: I'm not—Now, that was before your daughter was born. So, I'm wondering who was the giraffe interest part—So, that one actually came from an—from an article I actually read about interesting graphs and infographics, and that one was on there, and I thought, I do find this interesting. I'll share it. [laughter] Now, it's worth noting since I do have a young daughter, I may return to giraffes in the near future. We'll find out. It works. [laughter] [08:54:55] **Councilmember Dan Kealey**: The giraffe pattern was—Yeah. It's the pattern on the of the giraffes skin—for coat, whatever. Right? Different parts of Africa, they have different patterns, yeah. From Angola all the way to— [08:55:10] **Gregg Lindberg**: I had friends that would brew coffee with caffeinated water. [08:55:15] **Mayor Elizabeth Kautz**: Mhm. Say that again. [08:55:17] **Gregg Lindberg**: A coffee with—They would use caffeinated water as the water to brew the coffee. [08:55:25] **Mayor Elizabeth Kautz**: But where do you get caffeinated water? Who would buy caffeinated water? Oh boy, am I behind. Look at this. [08:55:35] **Dan Tinter**: So, my go-to for many years was the— [08:55:40] **Mayor Elizabeth Kautz**: Mike, you were talking about the amount of caffeine that was in the beverage that you were interested in. Beverage that you were interested in. Yes, I care. Yeah, it was like—There's no way it's that many. Was it 200 or 300? 295 in like a latte. If memory serves, it's good timing. If memory serves, it was like over 300. Yeah. [08:56:05] **Gregg Lindberg**: But Panera puts it like wildly off the charts, so maybe Dan should try it. [08:56:10] **Mayor Elizabeth Kautz**: I mean, I'm—Don't do it. [laughter] Mike's chart—what he was interested in is a lot stronger than what you have here. [08:56:20] **Dan Tinter**: Well, I can give it a shot [clears throat] next year and give the giraffiest financial management plan—[laughter] [08:56:30] **Mayor Elizabeth Kautz**: Well, that's what I said when he told me. I said, "Oh my god." What is at the top? I can't read it from here. It's a Jolt Cola. Jolt? Jolt? still sell that? Good old Jolt. I—I don't know. [laughter] Well, you and Mike are right on the same zone of with these caffeinated beverages. Although I do have to say when—if—when asked if they do sell it, I—I really want to be like— [08:57:05] **Gregg Lindberg**: Mayor and members of the council, we can get you that information after the meeting. [laughter] [08:57:15] **Mayor Elizabeth Kautz**: Okay, is there anything else? Well, No, I got all my notes during the presentation. Thank you. Yeah. Thank you, Dan Tinter. Thank you, Jenny Rhode. Thank you, Gregg Lindberg and team. You know, and just going through all of the presentation of the FMP today, I see the influence of all of the studies that uh we have made. So, congratulations in getting all of that going. It surely has informed what we're seeing and what we need to continue to do. So, thank you very much, and to members of the council, I mean—And it's nice to go back since you picked up on the FMP from 2024, I pulled it up also, and it was nice to follow through what was going—what went on last year and what we're experiencing this year and to see the difference. So, thank you. Anything else? Well, we stand adjourned by acclamation, and thank you very much, Gregg and staff and Dan, for your work in contributing to help us. Good night, everybody.