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THIS IS THE 2025 BOND PROGRAM IN 2025, CAPITAL IMPROVEMENT PROGRAM, SPECIAL SESSION.
I APPRECIATE EVERYBODY'S UNDERSTANDING.
WE DELAYED OUR START, UH, FROM EIGHT 30 THIS MORNING TO 10, JUST TO GIVE THE ROADS A LITTLE CHANCE TO CLEAR OUT A LITTLE BIT.
SO APPRECIATE EVERYBODY'S UNDERSTANDING ON THAT.
UH, COUNSEL, JUST REAL QUICK ON THE AGENDA FOR TODAY, ITEM TWO IS GOING TO BE MOVED TO OUR NEXT WORK SESSION.
UH, MR. CK WILL BRING THAT BACK.
UH, THE WORKING PLAN AT THIS POINT IS TO GET THROUGH ITEM SIX, UH, AND THEN BREAK FOR LUNCH.
SO THEN WE COME BACK, UH, AND WE WILL JUST HAVE THE STAFF PRESENTATIONS FOR THE AFTERNOON.
UH, THERE WILL NOT BE A, THERE WILL NOT BE A PRESENTATION FROM POLICE, UH, TODAY, UH, THAT, UM, AND SO THAT WILL CARRY US THROUGH TO THE AFTERNOON.
AND HOPEFULLY BY THE TIME WE LEAVE HERE, ALL OF THE, UH, ALL THE SNOW AND ICE WILL BE MELTED BY THE TIME WE GET OUTTA HERE THIS AFTERNOON IF THE FORECAST HOLDS, HOLDS TRUE.
UH, SO LET'S GO AHEAD AND GET STARTED HERE.
UH, ITEM ONE, PUBLIC COMMENTS ON SPECIAL WORK SESSION ITEMS. I DON'T KNOW IF WE HAVE ANY SPEAKERS.
AND AGAIN, WE WILL COME BACK TO ITEM TWO AT THE NEXT WORK SESSION.
[3. O&M Tax Rate Strategy and Homestead/Senior Exemption Update – Jud Rex, Matt Watson, Allyson Steadman ]
O AND M, TAX RATE, STRATEGY AND HOMESTEAD, SENIOR EXEMPTION UPDATE.GOOD MORNING, MAYOR AND COUNCIL.
IT'S GOOD TO SEE YOU ALL AND, AND, UH, APPRECIATE YOU TAKING TIME OUT OF YOUR WEEKEND TO, UH, BE HERE AND, AND TALK ABOUT SOME IMPORTANT TOPICS.
UH, WE'VE, UH, INCLUDED QUITE A BIT ON THIS AGENDA AND, AND ARE HOPEFUL THAT WE CAN WORK THROUGH IT ALL TODAY, UH, EVEN WITH OUR DELAYED START THERE AND, AND, UH, GET YOU HOME BEFORE 7:00 PM TONIGHT.
UM, WE'RE GONNA KICK OFF WITH A COUPLE OF TOPICS THAT, UH, CAME UP DURING THE BUDGET PROCESS THIS PAST YEAR.
UM, SO REFLECTING BACK TO LAST SUMMER, YOU'LL RECALL THAT, UM, WE HAD A LOT OF CONVERSATIONS ABOUT OUR OPERATION AND MAINTENANCE, UH, PORTION OF OUR TAX RATE, AND, UH, WITH THE EFFECTS OF INFLATION OVER THE PAST SEVERAL YEARS.
AND WITH THE OPENING OF, UH, NEW FACILITIES THAT WILL HAPPEN AS A RESULT OF THE 2019 BOND PROGRAM, UH, WE'RE REALLY SEEKING TO OPTIMIZE OUR OPERATION AND MAINTENANCE TAX RATE, UH, AND COME UP WITH A STRATEGY OVER THE NEXT COUPLE OF YEARS TO REINFORCE, UH, THE IMPORTANT REVENUE THAT'S GENERATED FROM THAT TAX RATE.
UM, AND ALWAYS BEING RESPECTFUL THAT WE KNOW THAT THERE'S AN IMPACT ON RESIDENTS AND OUR COMMERCIAL BUSINESSES AND PROPERTY OWNERS, UH, WHEN WE TALK ABOUT TAX RATES.
AND SO, UH, IT'S WITH THAT IN MIND THAT WE, UM, WANNA REVISIT, UH, OUR, OUR PREVIOUS PLAN TO, UH, GO TO THE VOTERS IN NOVEMBER OF 2025 TO MOVE SOME TAX RATE FROM OUR DEBT SERVICE SIDE BACK TO THE OPERATION AND MAINTENANCE SIDE.
AND, AND, UH, WHAT YOU'LL HEAR FROM MATT AND ALLISON HERE IN A MINUTE IS A PROPOSAL TO WAIT UNTIL NOVEMBER OF 2026, UH, TO MAKE THAT SHIFT, UH, VERSUS GOING THIS YEAR.
AND SO, UM, WITH THAT, I'M GONNA TURN IT OVER TO OUR, OUR BUDGET AND FINANCE TEAM AND LET 'EM TAKE IT FROM THERE.
UH, THIS, UH, CHART HERE SHOWS, UH, BASICALLY WHAT OUR RECOMMENDATION IS ON PUSHING OUT THE TAX RATE SHIFT TO 2026 NOVEMBER, 2026.
AS JUDD SAID, WE WERE PLANNING ON MOVING FORWARD WITH TRYING TO GO TO THE VOTERS, UM, THIS NO, NEXT NOVEMBER, NOVEMBER, 2025.
BUT WITH, WITH A LOT OF THE, BASICALLY WITH EVERYTHING WE HAVE GOING ON, WE HAVE ONE PRO, WE HAVE OUR PROPOSITIONS THAT WE'LL TALK ABOUT LATER FOR OUR BOND PROGRAM FOR ECONOMIC DEVELOPMENT IN STREETS.
AND THEN ALSO THE SCHOOL DISTRICT IS RIGHT NOW GEARING UP TO PLAN FOR A TAX RATE INCREASE ON THEIR SIDE AS WELL FOR NOVEMBER OF 2025.
WE FEEL THAT IT IS PROBABLY BEST TO WAIT ONE MORE YEAR FOR THIS SHIFT.
AND WHAT THIS CHART IS SHOWING IN BLUE IS OUR O AND M RATE, WHICH IS TIED TO SB TWO, WHICH YOU'LL SEE SB TWO WENT INTO EFFECT IN 2019 20.
AND OVER TIME YOU CAN SEE THAT BLUE PIECE, THE O AND M TAX RATE HAS CONTINUED TO DWINDLE DOWN.
AND WITH, WITH THAT, UH, WITH, UH, INFLATION, YOU KNOW, CPI IS RUNNING, YOU KNOW, BELOW 3.5%, WHICH IS OUR CAP.
BUT WHEN YOU LOOK AT SOME OF OUR EXPENDITURES SUCH AS HEALTH INSURANCE, WHICH IS TRENDING ABOUT 7%, OUR PREMIUMS ON OUR PROPERTY WITH ALL THE WEATHER, WHICH WE'RE EXPERIENCING RIGHT NOW IN CALIFORNIA
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IS EXPERIENCING THO UNDERWRITERS ARE INCREASING THOSE PREMIUMS AT A ROUGHLY SEVEN TO 8%.WE ALSO HAVE SIGNIFICANT COSTS WITH CYBERSECURITY RUNNING ABOUT 7%.
AND THEN WE ALSO HAVE OUR, OUR FACILITIES THAT ARE IN THE 2019 BOND PROGRAM THAT ARE COMING ONLINE WITH INCREASED SQUARE FOOTAGE, INCREASED IN SERVICES.
AND THEN WE'RE GOING TO HAVE TO PLAN TO MAKE SURE THAT WE CAN STAFF THOSE FACILITIES.
SO WITH ALL THAT, WE ARE ANTICIPATING THAT WE WILL NEED A SHIFT FROM THE DEBT SERVICE TAX RATE OVER TO THE M AND O SO THAT WE CAN MAINTAIN AND CONTINUE OUR SERVICE LEVELS AT THE, AT THEIR CURRENT LEVEL.
SO WHAT THIS MEANS IS, UH, BY SHIFTING THAT OUT, WE'RE BASICALLY WANTING TO MOVE ABOUT 2.40 CENTS OVER TO THE M AND O SIDE OF THE COIN, RATHER THAN HAVING IT ON THE DEBT SERVICE.
AND THAT WILL GENERATE ABOUT $7 MILLION TO THE GENERAL FUND.
OF COURSE, THAT MEANS ON THE CAPITAL SIDE, WE WILL FOREGO THAT REVENUE, BUT WE HAVE BUILT THAT ALL INTO OUR PROJECTIONS.
WE SHOWED YOU, UH, AT THE WORK SESSION, WHAT WE CALL OUR DEBT DONUT.
WE HAVE THE CAPACITY TO MEET ALL THE FUTURE NEEDS THAT YOU WILL SEE TODAY, AND THAT SHIFT WILL NOT IMPACT THOSE.
AND THE REASON WHY WE'RE TALKING ABOUT THIS TODAY IS IF WE, IF COUNCIL STILL WANTS TO MOVE FORWARD WITH THIS TAX RATE SHIFT FOR THIS NOVEMBER, WE NEED TO KNOW BY TODAY.
AND THE REASON IS DUE TO THE STATE'S REQUIREMENTS, WE WILL HAVE TO PUSH UP OUR BUDGET PROCESS BY ABOUT A MONTH.
MEANING WE WOULD NEED TO START THE BUDGET PROCESS, LITERALLY PROBABLY MONDAY
UM, AND ALSO KEEP IN MIND, BY PUSHING THAT UP, WE WILL ALSO HAVE TO, WHEN WE GET INTO THE SUMMER, WE WILL BE HAVING TO BASE ALL OF OUR BUDGET NUMBERS FOR PROPERTY TAX REVENUE OFF ESTIMATES.
WE WILL NOT HAVE CERTIFIED NUMBERS.
SO THAT'S ANOTHER ISSUE THAT WE'LL HAVE MOVING FORWARD.
SO GO AHEAD AND MOVE TO THE NEXT SLIDE.
SO REALLY, THERE'S THREE OPTIONS.
OUR RECOMMENDATION IS TO GO AHEAD AND PUSH THIS OFF TO NOVEMBER OF 2026.
UM, BUT WE'RE LOOKING FOR GUIDANCE FROM CITY COUNCIL ON THE PATH Y'ALL WOULD LIKE TO MOVE FORWARD WITH THIS.
ALRIGHT, UH, ANYONE HAVE ANY QUESTIONS? UH, AS FAR AS, I MEAN, OBVIOUSLY WE'VE, WE'VE KIND OF COVERED SOME OF THIS THE OTHER NIGHT.
UH, THE QUESTION REALLY IS, UH, MOVING FORWARD ON THIS.
DO WE WANT TO, UH, DELAY UNTIL NOVEMBER OF 26 OR PROCEED WITH 25? SO WE'LL TAKE, UH, THE DELAY FUR.
IS THERE ANY, WELL, ACTUALLY, IS THERE ANYONE WHO WANTS TO MOVE FORWARD WITH 25 MOVING THIS TO, OR KEEPING THIS AT NOVEMBER OF 25? THAT WOULD, I'LL GO AHEAD AND SAY AS THOUGH WE ARE ALL IN FAVOR OF MOVING TO NOVEMBER OF 26.
WE'RE JUST KNOCKING THINGS OUT RIGHT AND LEFT HERE TODAY.
UH, SO THE OTHER ITEM THAT WE STARTED ADDRESSING LAST, UH, DURING THE, THE BUDGET PROCESS LAST YEAR, AND THIS WAS AT OUR JUNE WORKSHOP, WAS, UH, CONSIDERING, UH, CHANGES TO OUR HOMESTEAD AND SENIOR EXEMPTIONS.
AND SO THAT'S THE NEXT TOPIC, UH, FOR COUNCIL CONSIDERATION.
UM, WE'VE DONE A, A COMPARISON TO A LOT OF OUR CITIES IN THE METROPLEX AND, AND WHAT APPROACH THEY TAKE.
AND I'LL KIND OF START WITH A HIGH LEVEL OVERVIEW, AND THEN AGAIN, LET FINANCE AND BUDGET MATT AND ALLISON, UH, ADD SOME DETAILS TO IT.
BUT WHAT YOU SEE GENERALLY IS, UH, TWO APPROACHES THAT CITIES TAKE.
ONE IS THAT THEY, UH, FOCUS ON THE SENIOR EXEMPTION AND PROVIDE, YOU KNOW, KIND OF PUT THEIR EGGS IN, IN THAT BASKET, UH, AS IT COMES TO TAX RELIEF.
AND SO CITIES LIKE RICHARDSON THAT, UH, DON'T HAVE, HAVE A HOMESTEAD EXEMPTION, BUT HAVE A VERY SIGNIFICANT SENIOR EXEMPTION, UM, THAT'S AN EXAMPLE OF A CITY THAT TAKES THAT APPROACH.
UH, SOME CITIES TAKE AN APPROACH LIKE WE HAVE, WHICH IS TO PROVIDE SOME RELIEF FOR, UH, HOMESTEADERS AND SOME ON SE ON THE SENIOR SIDE.
AND SO YOU'VE GOT A, A ESSENTIALLY A BALANCED APPROACH WHERE WE'RE PROVIDING SOME TAX RELIEF TO SENIORS AND SOME TO, UH, ON THE HOMESTEAD SIDE.
AND SO WE'RE CURRENTLY AT 56,000 FOR OUR SENIOR EXEMPTION AND 10% FOR OUR HOMESTEAD EXEMPTION.
AND, UH, WE'VE PROVIDED A COUPLE DIFFERENT OPTIONS.
THE, THE, I DID WANNA NOTE PROCEDURALLY THAT THIS ITEM IS GOING TO THE ADMINISTRATIVE SERVICES COMMITTEE, UH, LATER THIS MONTH, UH, IN A A WEEK OR SO.
AND, UH, WHAT WE'RE, WHAT WE WANTED TO SHARE TODAY, AND I'VE, I'VE TALKED WITH THE CHAIR OF THE COMMITTEE, UM, DEPUTY MAYOR, PRO TEM, LUCK ABOUT JUST PROVIDING SOME BACKGROUND CONTEXT AND INFORMATION, UH, LEADING UP TO THAT MEETING, AND THEN ANY SUBSEQUENT CONVERSATIONS THAT THE COUNCIL HAS AT A, AT A WORK SESSION.
SO THAT, UM, WE'RE COMING TO THIS WITH, UH, KIND OF EYES WIDE OPEN AND, AND UNDERSTAND
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HOW THE EXEMPTIONS WORK, ESPECIALLY IN LIGHT OF SB TWO.SO, UM, NOT NECESSARILY LOOKING FOR GUIDANCE HERE.
THIS IS GONNA GO TO COMMITTEE, UH, BUT WANTED TO AT LEAST, UH, OPEN THE DOOR TO ANY QUESTIONS AND CONVERSATIONS AROUND EXACTLY HOW THE EXEMPTIONS WORK AND, AND THE BACKGROUND THERE.
SO, UM, I'LL CHIME IN AND LET THE, LET THE TEAM TAKE IT FROM THERE.
COUNCILOR WILLIAMS, DO YOU HAVE A QUESTION NOW OR ASK, OKAY.
MEMBER WILLIAMS, UH, UH, MR. CITY MANAGER WOULD, WOULD YOU BRIEFLY ADDRESS THE IMPACT ON THE COMMERCIAL SIDE, BUSINESS SIDE FOR BOTH OF THOSE SHIFTS? COULD YOU GO INTO THAT A LITTLE BIT? SURE.
UM, AND I'LL, I'LL ASK MATT TO, TO JUMP IN HERE, BUT GENERALLY WHAT HAPPENS AS A RESULT OF SB TWO IS THAT AT LEAST ON THE, UH, THE OPERATION AND MAINTENANCE SIDE OF THE TAX RATE, THERE IS A SHIFT THAT HAPPENS ANYTIME YOU, UH, MAKE AN ADJUSTMENT TO AN EXEMPTION.
SO IT, IT'S NOT JUST A, WE'RE FOREGOING, UH, PROPERTY TAX REVENUE, IF WE INCREASE THAT EXEMPTION, IT ACTUALLY SHIFTS THAT BURDEN OVER TO, UH, YOUR NON-HOMESTEAD NON-SENIOR PROPERTY OWNERS.
AND, AND SO WE'VE, WE HAVE A COMPARISON THERE, MATT, IF YOU WANT TO TALK ABOUT THAT.
SO BASICALLY WHAT HAPPENS IS ON THE, SO THERE'S AN M AND O PORTION OF THE TAX RATE, AND THERE'S A DEBT SERVICE PORTION OF A TAX RATE.
THE ACT, WHEN YOU INCREASE AN EXEMPTION, AS LONG AS YOU STILL GO UP TO THE VOTER APPROVAL RATE, WHICH IS THE 3.5% SB TWO REQUIREMENT, THE ONLY ACTUAL FOREGONE REVENUE IS ON THE DEBT SERVICE SIDE OF THE EQUATION.
WHAT HAPPENS ON THE M AND O SIDE IS THE CALCULATION WILL LOOK TO INCREASE THE TAX RATE SLIGHTLY TO TAKE OFF TO MAKE SURE THAT WE GET 3.5% WHEN WE TO SHIFT THAT TAX BURDEN OF THE LOSS, REV LOSS VALUE THAT WE HAVE FROM THE ADDITIONAL EXEMPTIONS.
SO WHAT HAPPENS IS, IS WHEN YOU INCREASE HOMESTEAD EXEMPTIONS OR SENIOR EXEMPTIONS, THE SENIORS IN THE HOMESTEAD, WE'LL SEE THE RELIEF.
BUT ON THE M AND O SIDE, WHICH IS ROUGHLY HALF OF THE TAX BILL HERE AT GARLAND WILL BE SHIFTED TO THOSE THAT OWN RENTAL PROPERTIES AND THOSE THAT OWN COMMERCIAL PROPERTIES, BASICALLY THOSE THAT DO NOT QUALIFY FOR EITHER ONE OF THESE EXEMPTIONS.
SO IN THIS EXAMPLE, THIS EXAMPLE IS A 1% INCREASE TO THE HOMESTEAD EXEMPTION AND A $4,000 INCREASE TO THE SENIOR EXEMPTION.
AND YOU CAN SEE THAT THE SENIORS WOULD'VE SAW LAST YEAR A $39 REDUCTION IN THEIR TAX BILL, ASSUMING A $200,000 VALUE OF A HOME.
THOSE THAT ARE OVER THE, UH, UNDER THE AGE OF 65 WITH JUST THE HOMESTEAD WOULD'VE SAW A $10 INCREASE BECAUSE THEY ARE ONLY GETTING THAT 1% HOMESTEAD.
THEY DO WOULD NOT QUALIFY FOR THE 4,000 WITH THE SENIORS.
BUT THEN YOU CAN SEE WHAT HAPPENS ON THOSE THAT OWN RENTAL PROPERTIES AND THOSE THAT OWN COMMERCIAL PROPERTIES, IF YOU HAD A $200,000 RENTAL PROPERTY HOME, IT WAS ABOUT A $4 INCREASE TO THEIR TAX BILL.
AND THIS IS ANNUAL, BY THE WAY.
AND ON A COMMERCIAL, FOR EVERY $1 MILLION OF VALUE, THAT'S ABOUT $21 ANNUALLY INCREASED TO THE BILL.
SO WHAT HAPPENS AGAIN IS THERE IS A SHIFT OF THE TAX BURDEN ONLY ON THE M AND O SIDE AND ON THE DEBT SERVICE SIDE, IT'S JUST FOREGONE REVENUE FROM THE CITY.
AND IN BOTH OF THESE OPTIONS THAT WE PROVIDED YOU, SO THIS ONE IS A 1% WITH A $4,000 INCREASE OF THE SENIOR, WE HAVE IN OUR DEBT SERVICE CAPACITY ABOUT $764,000.
SO WHAT THAT MEANS IS WE COULD, COUNCIL COULD EITHER MAKE THE DECISION TO FOREGO THAT REVENUE AND GIVE TAX RELIEF, REMEMBER ONLY TO THOSE THAT ARE SENIORS OR HOMESTEAD.
IT WOULD NOT GIVE TAX RELIEF TO RENTAL PROPERTY OWNERS OR COMMERCIAL, OR WE COULD PROGRAM THAT AND LEAVE IT IN THE CIP, WHICH EQUATES TO ABOUT A $10.5 MILLION CAPITAL PROJECT.
SO THAT'S WHAT THESE TWO OPTIONS THAT WE'RE SHOWING ARE.
THEY'RE JUST KIND OF BASELINE OPTIONS.
THERE'S HUNDREDS OF DIFFERENT WAYS THAT COUNCIL COULD CHOOSE TO DO THAT.
BUT KNOW, IF YOU GO ABOVE THESE, THE $764,000 THRESHOLD, WE ARE NOW GOING TO HAVE TO LOOK TO MAKE REDUCTIONS IN THE CAPITAL IMPROVEMENT PROGRAM THAT WE'RE TALKING ABOUT TODAY, THE BOND PROGRAM OR ANY OF THE OTHER INITIATIVES THAT WE HAVE PLANNED FOR, FOR THE FUTURE.
AND JUST, I WANTED TO THROW OUT, IT'S NOT IN THIS PRESENTATION, JUST KIND OF A RULE OF THUMB.
SO FOR EVERY $1,000 OF INCREASE FOR IN THE SENIOR EXEMPTION, THAT EQUATES TO ABOUT A MILLION DOLLARS OF CAPACITY
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IN THE CIP.FOR EVERY 1% INCREASE TO HOMESTEAD EXEMPTION, THAT EQUATES TO ABOUT A $6 MILLION CAPACITY DECREASE IN CIP.
AND IF, IF I MAY, HOW DOES THAT IMPACT, IF ANY, OUR ECONOMIC DEVELOPMENT GOALS AND STRATEGIC PLAN? DOES IT HAVE ANY IMPACT AT ALL? WELL, THAT'S PROBABLY A BETTER QUESTION.
QUESTION FOR OUR CITY MANAGER OR OUR ASSISTANT CITY MANAGER, ANDY.
BUT FROM A FINANCIAL PERSPECTIVE, I WOULD THINK THAT WOULD MEAN THAT WE WOULD JUST HAVE TO LOOK AT INDIVIDUAL.
IT'S, IT'S, TO ME IT'S ABOUT KIND OF A GRASSROOTS, GETTING OUT TO THE SMALL BUSINESSES IS WHO I THINK WOULD BE IMPACTED THE MOST AND ENSURING THAT WE CAN FIND ALL THE DIFFERENT MEMBER, WE HAVE TONS OF TOOLS AT OUR DISPOSAL FOR ECONOMIC DEVELOPMENT AND WITH SMALL BUSINESSES, I THINK WE COULD FIND A WAY TO ENSURE THAT THIS SHIFT DOESN'T COMPLETELY DESTROY THAT SECTOR.
AND HOW THAT LOOKS, I THINK, WOULD REQUIRE SOME PLANNING AND PART WOULD BE PART OF THAT, YOU KNOW, IN OUR STRATEGIC PLAN, SMALL BUSINESSES IS VERY IMPORTANT THAT Y'ALL PASSED.
SO I DON'T THINK THAT IT WOULD BE A, A HUGE DEAL.
'CAUSE REMEMBER AGAIN, WE'RE TALKING ABOUT $21 ANNUALLY.
I THINK THIS IS SOMETHING THAT WE COULD EASILY COME BACK AND, AND MAKE SURE IS NOT AN ISSUE MOVING FORWARD.
'CAUSE IT'S NOT A REAL MATERIAL SHIFT IN TAX UNDER THESE SCENARIOS.
NOW, OF COURSE, IF YOU WANTED TO DO A DEEP DIVE RELIEF AND SIGNIFICANT RELIEF TO SENIORS, IT COULD THEN BE START BECOMING MATERIAL FOR COMMERCIAL.
AND I, I'D BE, I MIGHT ADD, GO AHEAD.
UH, TO YOUR QUESTION, COUNCILMAN.
THE, UM, AS FAR AS AN IMPACT ON ECONOMIC DEVELOPMENT, IT'S SOMETHING TO KEEP IN MIND AND KEEP AN EYE ON.
YOU KNOW, WE HAVEN'T, WE HAVEN'T MADE AN ADJUSTMENT TO OUR EXEMPTIONS IN FIVE YEARS.
AND SO, UM, WHILE WE REVIEW IT EVERY YEAR, AGAIN ON THE COMMERCIAL TAX BURDEN, IT'S SOMETHING THAT, THAT WE WANNA MONITOR AND KEEP IN MIND, UM, MAKING A CHANGE EVERY THREE TO FIVE YEARS, OR AGAIN AT COUNCIL'S PLEASURE, IT'S JUST SOMETHING THAT WE WOULD CONSIDER AS A FACTOR WHEN LOOKING AT ADJUSTING THE, THE TAX EXEMPTIONS THAT, THAT SHIFT.
UH, AGAIN, IT'S ONLY THE HALF OF THE TAX RATE, OUR O AND M SIDE, BUT, UM, OVER TIME, IF YOU LET THAT ACCUMULATE, IT REALLY COULD SHIFT THE, THE BURDEN OVER TO THE COMMERCIAL PROPERTY OWNER.
SO SOMETHING TO KEEP IN MIND FOR SURE.
WELL, I LOOK FORWARD TO, TO THE STRATEGIES YOU PLAN, YOU TALKED ABOUT, UH, UH, BRINGING TO US, YOU KNOW, TO LESSEN THAT IMPACT ON PARTICULARLY THE SMALL BUSINESS COMMUNITY.
I LOOK FORWARD, LOOK FORWARD TO SEEING THAT.
QUICKLY, I, THIS IS OPTION TWO AND WHY WE WANTED TO SHOW THIS OPTION IS IF, IF IN THIS OPTION, YOU'RE GIVING ALL THE RELIEF TO JUST THE SENIOR EXEMPTION, SO YOU COULD INCREASE BACK TO THAT $764,000 OF REVENUE THAT COULD BE FORGONE, YOU COULD INCREASE THE SENIOR EXEMPTION BY $11,000.
AND I JUST WANTED TO POINT OUT ON THIS ONE THAT BY DOING THAT, BECAUSE THE ONLY INDIVIDUALS NOW THAT ARE GETTING THE BENEFIT ARE SENIORS, THE TAX BURDEN IS NOW SHIFTED TO THOSE WITH HOMESTEAD AS WELL.
SO IF YOU HAVE A HOMESTEAD EXEMPTION AND YOU'RE UNDER THE AGE OF 65, YOU WITH A $200,000 HOME, YOU NOW WOULD'VE SAW ALSO A $4 INCREASE IN YOUR TAX BILL IF THIS WOULD'VE GONE THROUGH IN OUR LAST BUDGET CYCLE.
SO THE SHIFT ALWAYS OCCURS TO THOSE THAT DO NOT RECEIVE THE BENEFIT, IF THAT MAKES SENSE.
AND THEN JUST QUICKLY, THE NEXT STEPS, UH, I BELIEVE THE NEXT, UM, ADMINISTRATIVE SERVICE COMMITTEE MEETING IS JANUARY 22ND.
AND, UH, FROM THERE THEY WILL START REVIEWING, UH, PROPOSALS AND MAKING RECOMMENDATIONS TO THE FULL COUNSEL.
UM, THE, THE ONLY THING THAT I REALLY WANTED TO POINT OUT IS THE ACTUAL REAL DROP DEAD DATE TO MAKE AN ADJUSTMENT TO THESE IS THE END OF JUNE.
SO BASICALLY WE HAVE TO DO THIS BY JULY 1ST.
WE'RE TRYING TO GET A EARLY START ON THIS TO GIVE AMPLE TIME FOR THE A, THE, UM, A SC TO MAKE A RECOMMENDATION ON THAT, BUT THAT IS THE DEADLINE.
SO, UH, ADMINISTRATIVE SERVICES WILL TAKE THIS UP ON THE 22ND.
UM, YOU KNOW, I MEAN, AS FAR AS REPORTING OUT, UH, ON THAT, I DON'T KNOW HOW, WHAT THAT PROCESS IS GONNA LOOK LIKE.
UM, DO WE ANTICIPATE, UH, BEING ABLE TO DO THAT BY THE END OF FEBRUARY OR ARE WE GOING TO, I MEAN, OBVIOUSLY THE COMMITTEE JUST KIND OF LET SEE HOW IT GOES, UM, BUT OBVIOUSLY THE, THE FASTER
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WE CAN GET IT TOGETHER, THE MORE PREPARED WE CAN BE, UH, PRIOR TO THE DEADLINE.SO LOOK FORWARD TO HEARING BACK FROM THE COMMITTEE.
NEXT UP, I BELIEVE WE'RE MOVING
[4. Overview of 2025 Proposed Bond Program Propositions – Jud Rex, Andy Hesser, Matt Watson ]
INTO AN OVERVIEW OF THE 2025 PROPOSED BOND PROGRAM AND SPECIFICALLY THE PROPOSITION.SO, UH, MONDAY WE TALKED IN DETAIL ABOUT, UH, WHAT THE, UH, BOND STUDY COMMITTEE'S RECOMMENDATIONS WERE, AND ALSO PROVIDED SOME RECOMMENDATIONS FROM OUR BOND COUNCIL SPECIFIC SPECIFICALLY TO PUT THE GATEWAYS AND CORRIDORS PROPOSITION THAT THE BOND STUDY COMMITTEE, UH, RECOMMENDED AND ADDING THAT TO THE STREETS PROGRAM.
SO THAT WOULD MEAN THAT INSTEAD OF FIVE PROPOSITIONS, WE HAVE FOUR PROPOSITIONS NOW, AND THE STREETS PROPOSITION WILL INCREASE BY $20 MILLION TO 230 MILLION, MAKING UP ABOUT 64% OF THIS TOTAL BOND PACKAGE THAT'S BEING PROPOSED.
ECONOMIC DEVELOPMENT'S ABOUT, AT ABOUT 75 MILLION AND REPRESENTS ABOUT 21% MUNICIPAL FACILITIES IS REALLY SPECIFICALLY RELATED TO THE GRANDVILLE ART CENTER AT 25 MILLION.
AND THEN WHAT WE'RE CALLING PARKS AND RECREATION, WHICH IS SPECIFICALLY LOOKING AT PUBLIC WATERFRONT ACCESS TRAILS OR OTHER PARK AMENITIES IN THE HARBOR POINT AT $30 MILLION, OR ABOUT 8% FOR A TOTAL PROPOSED PACKAGE OF $360 MILLION.
SO WHAT I WANTED TO DO IS JUST KIND OF WALK THROUGH EACH ONE OF THESE PROPOSITIONS ON WHAT THE BOND STUDY COMMITTEE WAS RECOMMENDING FOR, FOR INCLUSION IN THESE PROPOSITIONS.
AND THEN JUST QUICKLY TALK THROUGH THE PRO THE PROPOSED PROPOSITION LANGUAGE THAT STAFF AND OUR BOND COUNCIL HAS COME UP WITH FOR EACH ONE OF THESE PROPOSITIONS.
AND THEN JUST LOOK FOR DIRECTION FROM COUNSEL ON IF THERE'S ANYTHING THAT Y'ALL WOULD LIKE US TO RESEARCH FURTHER, OR ANY QUESTIONS OR ANYTHING THAT Y'ALL WOULD LIKE TO SEE CHANGED.
SO STARTING WITH THE STREETS, UM, THE 210 MILLION, AGAIN IS PART OF THE FIVE YEAR PLAN TO INCREASE OUR OCI.
UM, TONY, OUR STREETS DIRECTOR PROVI, HAS PROVIDED SOME REALLY GOOD PRESENTATIONS TO BOTH CITY COUNCIL AND OUR BOND STUDY COMMITTEE.
AND IN ORDER TO INCREASE THAT OCI, THEY HAVE DETERMINED THAT ABOUT $210 MILLION IS GOING TO BE REQUIRED TO MEET THOSE OCI PAVEMENT, UH, CONDITIONS ON THE GATEWAYS AND CORRIDORS.
AGAIN, THIS IS JUST THE FUNDING MECHANISM TO GET FUNDING FOR GATEWAYS AND CORRIDORS.
THERE ISN'T, YOU KNOW, THE DESIGN, THE, THE, THE LOOK OF THESE CORRIDORS WILL COME AT A LATER DATE.
THIS IS JUST THE FUNDING MECHANISM FOR THIS AT 20 MILLION FOR A TOTAL OF 230 MILLION.
SO, AGAIN, QUICK, IF YOU LOOK AT THE, THE BOND PROPOSITION LANGUAGE THAT WE CAME UP WITH, IT IS DESIGNED TO READ, TO BE, GIVE US FLEXIBILITY TO ISSUE DEBT, BASICALLY ANYTHING ASSOCIATED WITH STREETS.
SO AGAIN, THE, THE, THE INTENT OF THE BOND STUDY COMMITTEE'S RECOMMENDATION IS TO ENSURE THAT OUR RESIDENTIAL STREETS AND OUR ALLEYS OCI IS INCREASED AS WELL AS PROVIDING ROUGHLY 20, WELL, $20 MILLION FOR GATEWAYS AND CORRIDORS TO PROVIDE AN OPPORTUNITY FOR STREET SCAPING AND BEAUTIFICATION IN MAJOR CORRIDORS.
BUT WE WANNA MAKE SURE THAT WE HAVE THE LATITUDE TO MEET UNFORESEEN CHALLENGES IN THE PROPOSITION LANGUAGE.
SO YOU'LL SEE THAT THERE IS BASICALLY ANYTHING UNDER THE SUN THAT MAY BE ASSOCIATED WITH THE STREETS HERE.
SO IF WE GOT INTO, SAY, ONE STREET, AND WE NEED TO DO, SAY A RETAINING WALL, WE NEED TO DO TRAFFIC CONTROL SIGNALS NEED TO BE REPLACED, WE WANNA MAKE SURE THAT WE HAVE THE FLEXIBILITY TO DO THAT.
SO FOR RIGHT NOW, THIS IS THE WAY THIS BOND PROPOSITION LANGUAGE READS, UH, AND THAT WE'RE PROPOSING TO CITY COUNCIL.
UM, ONE THING TO POINT OUT IS I'VE ALSO ADDED THE LANGUAGE THAT WILL ACTUALLY SHOW UP ON THE BALLOT, WHICH IS A MUCH SHORTER PIECE OF INFORMATION, WHICH IS USUALLY JUST A ONE SENTENCE, YOU KNOW, $230 MILLION FOR STREETS THROUGH THE WORK WITH THE BON CITY COMMITTEE.
WE, WE LOOK TO TRY TO BUCK IT, SP SPECIFICALLY THE ECONOMIC DEVELOPMENT PROPOSITIONS INTO REALLY TWO THINGS.
WHAT, WHAT, WHERE DO WE HAVE MASTER PLANS? WHERE HAVE WE IDENTIFIED WHERE PROJECTS ARE, ARE READY TO START? AND TWO, BUCKETING IT INTO ITEMS THAT ARE, WE CALL CHARGE BUCKETS BASED OFF OF OUR
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ECONOMIC STRATEGIC PLAN.SO WHAT WE CAME UP WITH IS BASICALLY LAND ASSEMBLY, ROUGHLY $25 MILLION FOR LAND ASSEMBLY.
AND HOW WE LOOKED AT THAT IS LOOKING AT OUR CATALYST AREAS AND LOOKING AT SPECIFIC PARCELS OF LAND THAT WE FELT WOULD BE FAIR.
THERE'S NOT A, SOME SIGNIFICANT BURDEN SUCH AS STRUCTURES ON THAT, THAT MAY INCREASE THE COST.
SO WE DID A DEEP DIVE ANALYSIS AS BASICALLY EVERY OPEN PARCEL IN OUR CATALYST AREAS, AND WE'VE CAME UP WITH $25 MILLION AS A TARGET FOR THIS AREA, THE ECONOMIC DEVELOPMENT INCENTIVES OF $33 MILLION.
WHAT THIS MONEY WOULD REALLY BE, AND I'VE BEEN CALLING IT GAP FINANCING.
AND, AND EVEN WITH LAND, AND EVEN WITH DOING REVITALIZATION, THERE ARE CERTAIN PARTS OF, OF THE TOWN WHERE WE WANT SOME SIGNIFICANT IMPROVEMENTS.
AND WHERE WE'RE FOCUSED HERE IS SOUTH GARLAND MEDICAL DISTRICT WITH A MEDICAL FACILITY AND HARBOR POINT.
WE FEEL THAT EVEN WITH THESE INVESTMENTS TO BRING, TO BRING A MEDICAL FACILITY TO BRING SIGNIFICANT CHANGES TO HARBOR POINT, IT WOULD REQUIRE AN INCENTIVE OR GRANT TO ENSURE THAT WE GET WHAT WE NEED TO, TO FINISH OUT THOSE MASTER PLANS.
AND WE'VE COME UP WITH $33 MILLION IN THIS CATEGORY.
WE ALSO HAVE A REVITALIZATION PROGRAM, WHICH WOULD BE A NEW PROGRAM CITYWIDE.
AND WHAT THIS WOULD BE IS LOOKING AT, UM, FACADE IMPROVEMENTS FOR SHOPPING CENTERS.
COULD BE A HOME IMPROVEMENT PROGRAM AS WELL.
BUT REALLY THIS WOULD BE JUST THE FUNDING MECHANISM SET ASIDE FOR COUNCIL TO MAKE DECISION POLICY DECISIONS MOVING FORWARD TO PROVIDE SOME FORM OF REVITALIZATION PROGRAM CITYWIDE.
UM, I'M THINKING SOMETHING SIMILAR TO WHAT WE SEE AT DOWNTOWN WITH THE FACADE IMPROVEMENTS THERE.
AND THEN FINALLY, THE NEIGHBORHOOD VITALITY, WHICH HAS BEEN A PROGRAM THAT'S BEEN GOING ON SINCE 2004, JUST PROVIDING THE SAME LEVEL OF FUNDING THAT THEY RECEIVED IN 2019, WHICH IS A $7 MILLION TO CONTINUE FUNDING THAT PROGRAM FOR A TOTAL OF 75 MILLION.
AND HERE IS THE PROPOSITION LANGUAGE, UH, AS DRAFTED BY OUR BOND COUNCIL FOR THIS PROPOSITION.
AND AGAIN, SIMILAR TO STREETS, THIS WILL READ BASICALLY TO PROVIDE INCENTIVES AND GRANTS LAND, BASICALLY ANYTHING, AGAIN, TO ENSURE THAT WE CAN REACT TO THE MARKET AND MA MEET OPPORTUNITIES AS THEY COME.
UM, ONE THING TO I WOULD WANNA POINT OUT IS THERE MIGHT BE A SLIGHT CHANGE IN THE LANGUAGE RELATED TO MEDICAL FACILITIES.
UH, BOND COUNCIL'S STILL WORKING ON THAT, BUT, UH, THEY STILL, THEY FEEL COMFORTABLE WITH WHAT WE HAVE, BUT THEY JUST WANNA MAKE SURE THEY'RE, THEY CHECK ALL THE BOXES BEFORE MOVING FORWARD.
SO, UH, IF THERE IS A CHANGE WITH THIS, WE WILL BRING IT BACK TO CITY COUNCIL FOR REVIEW.
PROPOSITION C IS CULTURAL ARTS, AND AGAIN, THIS IS THE GRANDVILLE ART CENTER RENOVATION.
AMY AND CHIP DID A GREAT JOB PRESENTING ON THE DETAILS OF THIS PROJECT, UH, MONDAY NIGHT.
UM, SO THIS PROPOSITION IS, UH, SPECIFICALLY ASSOCIATED WITH GRANVILLE ARTS CENTER, BUT YOU'LL SEE IN THE PROPOSITION LANGUAGE, WE HAVE TRIED TO AGAIN, MAKE THIS FLEXIBLE IN CASE ONE, SAY THE GRANVILLE ARTS CENTER COMES IN UNDER BUDGET AND THERE'S TWO $3 MILLION LEFT.
WE WANNA MAKE SURE THAT WE HAVE THE FLEXIBILITY TO DO OTHER CULTURAL ARTS PROJECTS, SAY A MAYBE A MONUMENT PIECE OR SAY TRAILS PARKING LOT IMPROVEMENTS.
BUT THE INTENT IS STILL FOR THIS ENTIRE PRO PROPOSITION TO BE CULTURAL ARTS RELATED.
THE FINAL PROPOSITION IS PARKS AND RECREATION, AND IT'S $30 MILLION.
AND AGAIN, THE, UH, BOND STUDY COMMITTEE, THE SPECIFIC AREA THEY LOOKED AT WAS HARBOR POINT.
AND A CONCEPT SIMILAR TO WHAT YOU SEE IN THE, THE DRAWING THERE BELOW IT IS THAT OF SOME WATERFRONT ACCESS, BOARDWALK OR SOME SORT OF OTHER CONNECTIVITY IN THAT AREA TO THE WATER.
SO WE'VE ESTIMATED THAT THAT WOULD COST ABOUT $30 MILLION.
BUT AGAIN, IN THE PROPOSITION LANGUAGE, WE WANTED TO PROVIDE THE FLEXIBILITY IN CASE SOMETHING FALLS THROUGH, WE NEED TO PIVOT, OR COUNSEL WANTS TO CHANGE, UH, YOU KNOW, THE DESIGNS OF, OF WHAT WE'RE, WHAT WE'RE ANTICIPATING WITH THIS TO BASICALLY INCLUDE
[00:30:01]
EVERYTHING PARKS AND REC RELATED.SO AGAIN, IT WILL BE ANYTHING, TRAILS, RECREATION, FACILITIES, PARKS, FACILITIES, UH, SO THE PROPOSITION FROM A LEGAL PERSPECTIVE AND A BOND ISSUANCE PERSPECTIVE IS MADE TO BE FLEXIBLE.
SO WITH THAT, UH, OPEN IT UP TO ANY QUESTIONS, COMMENTS, AND OR CHANGES, AND WE WILL DO OUR BEST TO ANSWER THOSE QUESTIONS.
UH, ANY QUESTIONS, UH, ON THIS PORTION, THIS
[5. Council Discussion and Questions regarding Proposed Bond Program Propositions]
IS ACTUALLY, WE WOULD BE AT ITEM FIVE, COUNCIL DISCUSSION AND QUESTIONS REGARDING PROPOSED BOND PROGRAM PROPOSITIONS.ANY QUESTIONS GOOD WITH THE FOUR MOVING FORWARD? AND OBVIOUSLY THE LANGUAGE, UH, IS, IS IN THE WORKS ON ONE OF THEM, BUT I SEE THAT WE'RE ALL GOOD WITH MOVING FORWARD.
UM, SORRY, JUST MAKING A QUICK NOTE HERE.
UM, THAT MOVES US AND, AND, UM, I'VE ASKED, UH, STAFF TO GO AHEAD AND GET, UH, STAFF PRESENTATIONS STARTING TO QUEUE UP BECAUSE OBVIOUSLY I THINK WE'RE GONNA GET TO THEM, UH, WELL BEFORE LUNCH.
[6. Overview of 2025 Proposed CIP – Jud Rex, Matt Watson, Allyson Steadman]
TO, EXCUSE ME, ITEM SIX, OVERVIEW OF 2025 PROPOSED CIP, MR. REX.UM, SO TO INTRODUCE OUR CIPI WANTED TO JUST TOUCH ON A COUPLE THINGS THAT WE VISITED ABOUT MONDAY.
UM, THE FIRST IS, WHAT ARE OUR PRIORITIES GOING INTO THE CIP? AND, UH, THIS IS A LITTLE BIT OF COPY AND PASTE FROM LAST YEAR, BUT, UH, THE THEMES REMAIN RELEVANT AND REMAIN THE SAME, WHICH ARE THE, ARE OUR GOALS ARE TO FINISH WHAT WE HAVE STARTED, TAKE CARE OF WHAT WE HAVE AND PLAN FOR THE FUTURE.
UH, MEANING THAT, UH, FINISH WHAT WE'VE STARTED.
WE HAVE MANY, MANY PROJECTS THAT HAVE BEEN KICKED OFF AND ARE EITHER, UH, CONTEMPLATED TO BE UNDER DESIGN IN THE NEXT FEW YEARS OR CURRENTLY UNDER DESIGN OR CURRENTLY UNDER CONSTRUCTION.
OUR EMPHASIS IN THE CIP HAS BEEN TO MAKE SURE THAT WE CAN BRING THOSE TO COMPLETION, UM, AS QUICKLY AS POSSIBLE.
AND SO THAT, THAT MEANS THAT, UH, FUNDING FOR THOSE PROJECTS, UH, NEEDS TO BE SUSTAINED IN ORDER TO MEET THE SCOPE OF THE PROJECTS.
AND, UM, REALLY JUST WANT TO, WE WANT TO DELIVER ON WHAT WE'VE PROMISED, UH, WHEN IT COMES TO ESPECIALLY THE 2004 AND 2019 BOND PROJECTS.
UH, TAKE CARE OF WHAT WE HAVE.
UM, COUNCIL, WE'VE CREATED A PRETTY AMBITIOUS PLAN, ESPECIALLY ON, ON TWO KEY ASSETS THAT THE CITY HAS.
ONE IS OUR FACILITIES, UM, ACROSS THE CITY, UH, A PRETTY AMBITIOUS PLAN TO FUND THOSE.
UM, THERE'S A NUMBER OF IMPROVEMENTS AND FUNDING THAT, THAT ARE HEADED TOWARDS OUR FACILITIES TO MAKE SURE THAT THE BONES OF THOSE FACILITIES ARE MAINTAINED WELL.
AND THEN THE OTHER, THE OTHER BIG SPEND HERE IS, UM, ON OUR STREETS PROGRAM AND COUNSEL, YOU'VE SET A, A AN AMBITIOUS GOAL ON OUR, ON OUR, UH, PCI TO GET THAT TO WHAT, WHAT YOU WANT IT TO BE.
AND, UH, WE KNOW THAT WE'VE INCORPORATED THAT INTO THE BOND PROJECTS, THE BOND PROGRAM FOR, UH, THAT'LL BE VOTED ON THIS MAY.
UH, SO, UH, WE WANNA DELIVER ON THAT AS WELL AND RESERVE THE FUNDING AND CAPACITY NEEDED TO DO THAT.
UM, AND THEN REALLY TAKE CARE OF EVERYTHING ELSE THAT WE HAVE IN TERMS OF, UH, KEY SERVICES ACROSS THE CITY AND THE EQUIPMENT AND MATERIALS THAT ARE NEEDED TO DO THAT.
UM, OUR, OUR PROPOSED CIP IS BUILT IN, UH, A LOT OF SPEND IN REGARDS TO EQUIPMENT, AND YOU'LL HEAR ABOUT THAT FROM THE DEPARTMENTS TODAY AND THEN PLAN FOR THE FUTURE.
UM, SO THE, THE TOPICS WE'VE COVERED SO FAR REALLY HELP US PLAN FOR THE FUTURE WHEN WE TALK ABOUT OUR TAX RATE, UH, EXEMPTIONS, UH, THE BOND PROGRAM COMING UP.
AND, UM, WE'VE ALWAYS KEPT A CLOSE EYE ON, ON WHAT WE NEED TO DO, UH, NOT JUST FOR THE NEXT FIVE YEARS, BUT REALLY OUR DEBT SERVICE MODEL GOES OUT DECADES, UH, BECAUSE WHEN WE'RE ISSUING 20 AND 30 YEAR DEBT, UH, WE'VE GOTTA KEEP AN EYE ON HOW THAT STACKS UP OVER TIME.
AND SO REALLY WANT TO GIVE A HUGE KUDOS, UH, TO OUR BUDGET STAFF, UH, ALLISON AND HER TEAM, AND MATT AND HIS TEAM, UH, FOR HELPING US PLAN FOR THE FUTURE AND, AND ALWAYS KEEP THAT LONG-TERM PICTURE IN MIND.
UH, THE SECOND SLIDE HERE THAT I'LL TALK ABOUT BRIEFLY, AND, AND YOU'RE GONNA PROBABLY GET TIRED OF HEARING ABOUT THE DEBT DONUT, BUT, UH, THERE'S JUST NO BETTER WAY TO SHOW WHAT, UH, WHAT OUR INITIATIVES ARE THAN, THAN, UH, IN A DONUT FORUM, I GUESS.
SO
UM, THEY TOTAL UP TO JUST OVER A BILLION DOLLARS.
AND SO, UM, THAT'S A PRETTY SIGNIFICANT SPEND FOR THE CITY.
UH, WE ARE GONNA TOUCH ON HERE IN A FEW MINUTES ABOUT, UM, OUR BOND RATINGS AND THE IMPACT THAT THIS, UH, BILLION DOLLAR SPEND WILL HAVE ON OUR BOND RATINGS AND OUR STRATEGY AROUND THAT, UM,
[00:35:01]
TO CONFIRM, UH, COUNCIL DIRECTION MOVING FORWARD.BUT, UM, YOU KNOW, THE DEBT DONUTS MADE UP OF, OF SOME PRETTY SIGNIFICANT PIECES HERE, INCLUDING THE CIP, UH, INCLUDING OUR BOND PROGRAM THAT WE'RE CONTEMPLATING FOR 25, UH, MAY OF 25, UM, WITH SOME PRETTY HEFTY ECONOMIC DEVELOPMENT GOALS AND STREET SPEND.
UH, AND THEN OF COURSE WE, WE ALWAYS LEAVE ROOM FOR EMERGENCY AND INFLATION RESERVES AND, UH, DRAINAGE IMPROVEMENTS THAT ARE GONNA DRAINAGE IMPROVEMENTS THAT, THAT NUMBER'S GROWN A LOT.
COUNCIL, YOU'LL RECALL THAT WE HAVE, UH, PER YEAR DIRECTION, UM, INCREASED OUR STORM WATER FEES IN ORDER TO, TO HELP FUND DRAINAGE PROJECTS.
AND SO, UM, THERE'S A, A BIGGER PIECE OF THE DONUT NOW IS ON DRAINAGE IMPROVEMENTS, WHICH IS ANOTHER ASSET THAT WE'RE, UH, THAT WE NEED TO MAINTAIN AND IN THE SPIRIT OF TAKING CARE OF WHAT WE HAVE.
UH, SO WITH THAT, UH, WE HAVE SOME ADDITIONAL INFORMATION THAT WE WANT PRESENT ON THE CIP, UH, TO CONTINUE TO, UM, PROVIDE CONTEXT AND BACKGROUND AROUND IT.
UM, YOU KNOW, THE CITY HAS A LOT OF DIFFERENT BUCKETS OF MONEY TO DRAW FROM FOR CAPITAL PROJECTS.
AND SO, UH, WE WANNA RUN THROUGH THOSE AGAIN JUST TO MAKE SURE THAT EVERYBODY'S AWARE OF, OF WHAT OUR BUCKETS ARE AND, AND WHAT OPPORTUNITIES ARE THERE.
AND, UM, YOU KNOW, THERE'S A LOT OF ASSUMPTIONS THAT GO INTO THIS DEBT DONUTS, UH, WHETHER IT'S INTEREST RATES OR UM, UH, CAPACITY THAT'S AVAILABLE.
UH, WE'RE GONNA TALK ABOUT SOME OF THE, THE CRITERION STRUCTURE AND, AND ASSUMPTIONS THAT ARE IN THAT.
SO, UM, PLEASE JUMP IN WITH ANY QUESTIONS YOU'VE GOT AS WE, AS WE RUN THROUGH THIS.
AGAIN, THIS IS, THIS IS YOUR TIME FOR YOUR BENEFIT, UH, AS YOU LOOK TO MAKE SOME KEY DECISIONS ON OUR UPCOMING INITIATIVES.
SO, UH, WITH THAT, I THINK THE NEXT SLIDE IS, UH, IS FOR ALLISON.
UM, GOING BACK TO THE, UH, 2024 CIP, UH, CAN YOU SHARE ANY, ANY EXPERIENCES OR LESSONS LEARNED FROM THAT EXERCISE THAT WE'VE, WE MODIFIED AND, AND THAT'S REFLECTIVE IN THE 2025 CIP FROM, FROM, FROM THAT ONE TO THIS ONE.
WERE THERE ANY LESSONS LEARNED EXPERIENCES, UH, THAT, THAT YOU SAW TO SHIFT? ANY, ANYTHING FROM THERE? YEAH, THAT'S, THAT'S A GREAT QUESTION AND I THINK, UM, YOU KNOW, ONE THAT COMES TO MIND IS HOW WE ARE MANAGING OUR WATER AND WASTEWATER PROJECTS.
SO IN PAST CIPS, UM, ESSENTIALLY WHAT WE'VE DONE IS CREATED A, A PROGRAM BUCKET OF MONEY FOR WATER AND WASTEWATER IMPROVEMENTS WITHOUT BREAKING OUT SPECIFIC PROJECTS, UH, IN THE WATER AND WASTEWATER FUND.
SO, UH, WE'VE KIND OF, WE'RE, WE'RE CHANGING THAT.
AND SO THE, THE WATER AND WASTEWATER SECTIONS IN YOUR CIP HAVE GOTTEN A LOT BIGGER.
NOW, THE NUMBERS HAVE GROWN A LITTLE BIT, BUT, UH, WE ARE GETTING VERY SPECIFIC ABOUT, UH, WHERE THAT BUCKET OF MONEY GOES TO IN TERMS OF WATER AND WASTEWATER PROJECTS, UH, WHETHER THAT'S WATERLINE REPLACEMENTS, UM, ENHANCEMENTS AT THE PLANTS OR OTHER SPENDS ON OUR WATER AND WASTEWATER.
UM, THAT'S ONE BIG CHANGE THAT YOU'LL HEAR.
AND, AND MIKE BRINKMAN AND, AND CRYSTAL OWENS WILL TALK ABOUT THAT WHEN WE GET TO THE DEPARTMENT PRESENTATIONS.
BUT, UH, WE WANT TO INCREASE THE TRANSPARENCY OF, OF THAT FUNDING AND ALSO JUST BE ABLE TO BETTER TRACK AND RESPOND TO THE NEEDS IN OUR, IN OUR UTILITY SYSTEM.
SO THAT'S ONE, THAT'S ONE CHANGE THAT WE'RE MAKING THIS YEAR THAT MAKES THIS DOCUMENT A LITTLE BIT THICKER.
UM, NOW IT'S, IT'S NOT THAT WE HADN'T BEEN SPENDING THAT MONEY AND THAT, THAT THAT WAS THE SORT OF THE WRONG WAY OF DOING IT.
IT WAS JUST WE THOUGHT WE'D PUT A LITTLE MORE RIGOR IN AND TRANSPARENCY INTO THOSE WATER AND WASTEWATER PROJECTS.
SO, UM, YOU'LL, YOU'LL SEE AND HEAR ABOUT THAT.
UM, YOU KNOW, AS FAR AS OTHER LESSONS LEARNED, I, I THINK THAT THAT'S KIND OF THE ONE THAT POPS INTO MIND AND I'LL, I'LL DEFER TO MATT AND ALLISON IF YOU GUYS HAVE ANY THOUGHTS TO ADD, ADD TO THAT TOO.
UH, WE, WE ALSO, UH, KUDOS TO CRYSTAL WITH THE PROJECT MANAGEMENT OFFICE.
WE ALSO TOOK ON AN INITIATIVE TO CREATE A, A PROJECT MANAGEMENT FACILITIES BOARD IN ORDER TO EVALUATE PROJECTS BEFORE THEY GET TO THE CIP.
SO REMEMBER, THERE'S SOME TIGHT TIMELINES TO GET PROJECTS ACROSS THE FINISH LINE AND, AND SUBMIT IT TO US TO THE, TO THEN PROVIDE TO Y'ALL.
AND BASICALLY WHAT THIS DOES IS PROVIDE ADDITIONAL TIME TO, TO PLAN AND TO EVALUATE PROJECTS BEFORE YOU SEE THEM.
AND WHAT THE INTENTION OF THAT IS, IS TO HOPE TO CUT DOWN ON SCOPE EDITION SCOPE CHANGES IN THE FUTURE OR IN IN INFLATION COSTS TO BASICALLY LOOK, TO TRY TO REALLY GET A GOOD PLAN IN PLACE BEFORE IT GETS TO COUNCIL.
AND NOT SAYING THAT THERE WEREN'T GOOD PLANS PREVIOUSLY, BUT YOU KNOW, EVERYTHING, EVERYTHING COULD ALWAYS USE A LITTLE MORE PLANNING.
SO KUDOS TO CRYSTAL OWENS AND, UM, UH, PHIL AS
[00:40:01]
WELL ON PUTTING THAT TOGETHER.SO THAT STARTED THIS YEAR AS WELL.
AND BEFORE I DIVE INTO THE SLIDE, I WILL PLUG APPENDIX G, WHICH OUTLINES THE CHANGE ASSOCIATED WITH OUR WATER AND WASTEWATER PROGRAMS THAT YOU'LL BE HEARING ABOUT LATER TODAY.
I ALWAYS PLUG A SECTION OF THE DOCUMENT BEFORE I GET STARTED.
UH, SO I THINK YOU'VE ALL HEARD THIS SLIDE SEVERAL TIMES BEFORE, BUT IT'S ALWAYS GOOD TO START FROM THE BASICS CIP 1 0 1, BEFORE WE DIVE INTO THE SPECIFICS OF THIS YEAR'S CAPITAL PLAN.
UM, THIS, THE CIP IS A FIVE YEAR, UH, FINANCIAL PLAN FOR OUR CAPITAL ASSETS.
WE'RE REALLY LOOKING, YOU KNOW, AS JED MENTIONED EARLIER, AT A 10 TO 50 YEAR LOOK WHEN YOU TALK ABOUT OUR DEBT MODEL.
BUT THE PLAN IN FRONT OF YOU IS REALLY FOCUSED ON THE NEXT FIVE YEARS, THE PROJECTS THAT WILL BE OCCURRING OVER THOSE NEXT FIVE YEARS, AS WELL AS THE DEBT ISSUANCE ASSOCIATED WITH THOSE TO QUALIFY FOR THE CIP, IT MUST MEET OUR POLICY CRITERIA IN THAT IT HAS A USEFUL LIFE OF AT LEAST FIVE YEARS AND TYPICALLY EXCEEDS AT LEAST $50,000 IN TODAY'S PRACTICE.
THAT'S REALLY MORE YOUR STARTING POINTS CLOSER TO A HUNDRED THOUSAND DOLLARS.
UM, SO THE DOCUMENT INCLUDES PROJECTS FOR THE NEXT FIVE YEARS, THE EXPECTED COSTS, THE METHOD OF FINANCING, AND ANY ANTICIPATED UTILITY OR TAX RATE IMPACTS.
AND THE CAPITAL BUDGET WE WILL BE ASKING COUNSEL TO APPROVE, UM, IN FEBRUARY, UH, OF THIS YEAR WOULD BE THE FIRST YEAR OF THAT CIP, ANYTHING IN THAT 2025 COLUMN.
AND IT IS IMPORTANT TO NOTE THAT WHEN YOU'RE TALKING CIP PROJECTS, THEY OFTEN SPAN MULTIPLE YEARS.
SO EVERYTHING MUST BE VIEWED FROM A MULTI-YEAR PERSPECTIVE.
WE HAVE MULTIPLE DEBT INSTRUMENTS INVOLVED WITH FUNDING OUR CAPITAL PROJECTS.
WE HAVE OUR GENERAL OBLIGATION BONDS, WHICH ARE PAID BY THE DEBT SERVICE TAX RATE.
THESE ARE USED TO FUND OUR 2004 AND 2019 BOND PROGRAMS. UM, WE HAVE CERTIFICATES OF OBLIGATION.
THESE ARE ALSO PAID BY OUR DEBT SERVICE TAX RATE, OR CAN BE REIMBURSED BY OTHER PLEDGED REVENUE SOURCES SUCH AS OUR SANITATION UTILITY RATE, OR OUR STORM WATER UTILITY RATE.
UM, CERTIFICATES OF OBLIGATION ARE ISSUED BASED ON THE USEFUL LIFE OF THE ASSET, SO WE TYPICALLY ISSUE THOSE IN 5, 10, 15, OR 20 YEAR INCREMENTS.
FINALLY, WE HAVE REVENUE BONDS THAT ARE UTILIZED BY OUR CITY, ELECTRIC WATER AND WASTEWATER UTILITIES.
UM, THESE CAN ONLY BE ISSUED FOR, UH, UTILITY RATED CA UTILITY RELATED CAPITAL PROJECTS AND ARE AMORTIZED BASED ON THE USEFUL LIFE OF THE ASSET.
WE DO HAVE TWO SHORT TERM MECHANISMS. OUR COMMERCIAL PAPER PROGRAM, UM, WHICH BEGINNING IN 2025, UM, IS ONLY BEING UTILIZED BY OUR UTILITY UH, DEPARTMENTS.
RIGHT NOW IT'S AN INTERIM FINANCING SCHOOL TOOL.
ESSENTIALLY IT'S A SHORT TERM INSTRUMENT THAT IS ISSUED IN ORDER TO KEEP BORROWING COSTS DOWN.
UM, WE ACCUMULATE UP TO A CERTAIN THRESHOLD AND THEN WE GO OUT AND ISSUE THE LONG TERM DEBT SUCH AS A REVENUE BOND.
AND I BELIEVE THE COUNCIL'S VERY FAMILIAR WITH OUR TAX NOTE.
THIS IS OUR PRIMARY FUNDING MECHANISM FOR OUR STREETS PROGRAM IN THE FY 25 OPERATING BUDGET.
UM, AND THIS IS ISSUED AND PAID UNDER THE DEBT SERVICE TAX RATE FOR LESS THAN A ONE YEAR INCREMENT.
OUR CIP IS COMPRISED OF THREE PRIMARY PROGRAMS ARE TAX SUPPORTED, ARE UTILITY SUPPORTED, AND OUR INTERNAL SERVICE, UM, OUR TAX SUPPORTED IS COMPRISED OF OUR BOND PROGRAMS AND LARGE CAPITAL ITEMS ASSOCIATED WITH OUR GENERAL FUND DEPARTMENTS SUCH AS PARKS AND RECREATION ENGINEERING OR LIBRARY.
UM, THESE ARE FINANCE WITH GO BONDS OR CERTIFICATES OF OBLIGATION AND REPAID THROUGH THE DEBT SERVICE TAX RATE.
OUR UTILITY SUPPORTED CIP IS INCLUDES OUR ELECTRIC WATER AND WASTEWATER UTILITIES, SANITATION UTIL AND STORM WATER UTILITY.
UM, THESE ARE FINANCED EITHER WITH REVENUE BONDS OR SARATOGA'S OBLIGATION AND REPAID THROUGH THOSE INDIVIDUAL UTILITY RATES.
AND THEN FINALLY WE HAVE OUR INTERNAL SERVICE SUPPORTED CIP.
UM, RIGHT NOW THE ONLY DEPARTMENT ACTIVE IN THE THE CIP IS OUR INFORMATION TECHNOLOGY DEPARTMENT.
UM, BUT WE HAVE HAD FLEET SERVICES AND CUSTOMER SERVICE PROJECTS IN THE PAST.
UH, THESE ARE FUNDED WITH CERTIFICATES OBLIGATION AND THEN REPAID THROUGH THE OPERATING BUDGET BY CHARGES TO OTHER FUNDS THAT UTILIZE THAT FUND SERVICES.
WE CONTINUE TO SET RECORDS WITH OUR ANNUAL CIP.
[00:45:01]
WE DO HAVE THE LARGEST CIP YET WITH OUR 2025 PROPOSED CIP OF ALMOST 575 MILLION.HOWEVER, WE ARE SEEING A DECREASE ON THE TAX SUPPORTED SIDE, PRIMARILY DUE TO US COMPLETING OUR OH FOUR AND 19 BOND PROJECTS, UH, YEAR OVER YEAR.
UM, THIS YEAR'S INCREASE IS PRIMARILY ASSOCIATED, UM, WITH OUR UTILITY FUNDS GETTING INTO THE TAX SUPPORTED CIP OUR PARKS.
CIP MAKES UP THE LARGEST AMOUNT OF THE TAX SUPPORTED PROGRAM AT ALMOST 30%, UM, WITH A PROJECTED SPEND OF 71.4 MILLION IN 2025, FOLLOWED BY OUR STREET AND TRANSPORTATION PROGRAM AT 50.9 MILLION AND PUBLIC SAFETY AT 34.6 MILLION.
OUR TOTAL TAX SUPPORTED CIP FOR 2025 IS 239.2 MILLION.
THIS IS A DECREASE OF ABOUT 6.4 MILLION FROM LAST YEAR'S CIP.
THE BOND PROGRAMS ARE A MAJOR PART OF OUR TAX SUPPORTED PROGRAM.
HERE WE SHOW OUR PROJECTED COMPLETION RATE RATES FOR THE BOND PROGRAM, UH, BY YEAR.
UM, YOU WILL SEE THAT PARKS AND UH, UH, PUBLIC SAFETY AND LIBRARY ARE ANTICIPATED TO BE COMPLETE BY THE END OF 2026.
AND OUR PARKS AND ECONOMIC DEVELOPMENT PROGRAMS ARE ANTICIPATED TO BE OVER 90% OF COMPLETE BY THE END OF THIS CURRENT YEAR WITH REALLY ONLY ONE PROJECT REMAINING ARE 2019 STREET AND TRANSPORTATION PROGRAM AND 2019 PARKS PROGRAMS, UH, WILL BE COMPLETE IN 2030 AND 2031 RESPECTIVELY, PRIMARILY DUE TO THOSE HAVING PARKS, CATALYST AND STREETS CATALYST FUNDING APPLIED TO A NEW PROJECT IN THIS YEAR'S CIP, UH, CALLED SOUTH GARLAND AVENUE REDEVELOPMENT PROJECT.
THE ONLY, UH, PROGRAM THAT WILL EXTEND PAST 2030 IS OUR DRAINAGE PROGRAM, AND THAT'S REALLY JUST BASED ON THE PROJECTED SPEND OF OUR FLOOD PRONE PROPERTIES PROGRAM.
UM, THIS IS A PROGRAM THAT, UH, INVOLVES, UH, INTERACTION WITH OTHER AGENCIES, UM, AND A PRETTY STRENUOUS PROCESS THAT CRYSTAL OWENS AND MICHAEL HICK COULD TALK MORE ABOUT.
UM, SO THIS IS JUST A PROJECTION BASED ON WHAT WE KNOW TODAY.
AND THEN FINALLY FOR OUR 2004 BOND PROGRAM, UM, WE ONLY HAVE A HANDFUL OF PROJECTS THAT, UM, ARE PROJECTED TO HAVE EXPENDITURES PAST 2026.
UM, AND THEY ARE PRETTY SIGNIFICANT DRAINAGE OR STREETS PROJECTS THAT JUST TAKE TIME TO DESIGN AND CONSTRUCT.
BUT ALL OF THESE PROJECTS ARE ANTICIPATED TO BE COMPLETE BY THE END OF 2029.
OUR TAX SUPPORTED CIP, UM, IS PROJECTED TO REQUIRE AN ISSUANCE OF GENERAL OBLIGATION BONDS OF 19.8 MILLION.
AND OUR TAX SUPPORTED CIPS ALSO ANTICIPATED TO REQUIRE A, UH, LARGER ISSUANCE OF CERTIFICATES OF OBLIGATION THIS YEAR OF ABOUT 63.9 MILLION FOR TOTAL TAX SUPPORTED DEBT ISSUANCE OF 83.7 MILLION.
I WILL NOTE, UM, A COUPLE YEARS AGO, COUNSEL UH, APPROVED THE UTILIZATION OF UH, 30 YEAR DEBT IN VERY SPECIFIC IN INSTANCES THIS WOULD BE FOR SOME OF THE CONSTRUCTION OF OUR MAJOR ARTERIAL ROADS.
UM, THE ONLY PROPOSED USE OF 30 YEAR DEBT IN 2025 IS ASSOCIATED WITH OUR HOLFORD ROAD SEGMENT, A PROJECT MOVING INTO THE COMPOSITION OF OUR TAX SUPPORTED DEBT.
UM, THIS PIE CHART MIRRORS EXACTLY WHAT JUDD OUTLINED AS HIS PRIORITIES.
WE HAVE MAJORITY OF OUR PROJECTS UNDER CONSTRUCTION IN 2025 AT ALMOST 47.3% OF OUR DEBT ISSUANCE GOING TO PROJECTS CURRENTLY UNDER CONSTRUCTION.
UM, WE HAVE 21.8% OF OUR DEBT GOING TO PROJECTS EITHER STARTING DESIGN OR BEGINNING THAT CONSTRUCTION IN 2025, WHERE YOU SEE US TAKING CARE OF WHAT WE HAVE PRIMARILY THAT'S ISOLATED UNDER OUR EQUIPMENT AND ONGOING PROGRAMS. OUR ONGOING PROGRAMS IS INCLUDES MAJORITY OF OUR FACILITIES RELATED SPEND ASSOCIATED WITH THE COM COMPLETION OF THAT FACILITY, UH, CONDITION ASSESSMENT AND ADDRESSING THE FINDINGS THERE AS WELL AS JUST GENERALLY MAINTAINING OTHER NEEDS WE HAVE AROUND THE CITY AND INCLUDING OUR EQUIPMENT.
THIS YEAR'S DEBT ISSUANCE INCLUDES A VERY SMALL AMOUNT FOR WHAT WE WOULD CLASSIFY AS NEW PROJECTS IN 2025 OF ABOUT 2 MILLION.
[00:50:05]
AND I'LL TURN IT OVER TO MATT TO TALK ABOUT SOME OF THE FACTORS THAT IMPACT OUR TAX SUPPORTED PROGRAM.SO WE ALSO WANTED TO PROVIDE A DEEPER DIVE TO SOME, SOME OF THE, UH, FACTORS THAT WILL IMPACT HOW THE, YOU KNOW, BASICALLY OUR COST OF BORROWING OR HOW MUCH REVENUE WE HAVE, HOW MUCH CAPACITY WE HAVE.
AND OBVIOUSLY THE FIRST ONE IS THE TAX BASE AS THE TAX BASE INCREASE THAT PROVIDES ADDITIONAL CAPACITY, ADDITIONAL REVENUE TO THE DEBT SERVICE FUND TO PROVIDE CAPITAL PROJECTS.
BUT OF COURSE, UH, ON THE FLIP SIDE, IF THE TAX BASE DROPS, THAT MEANS THAT CAPACITY WOULD SHRINK.
INTEREST RATES ALSO PLAY INTO HOW WE DETERMINE OUR CAPACITY.
SO IN IT, SEVERAL YEARS AGO WE WERE LOOKING AT INTEREST RATES, YOU KNOW, AT 2%, TWO AND A 5%, WHICH IS EXTREMELY LOW, HISTORICALLY LOW OVER THE LAST COUPLE OF YEARS, INTEREST RATES HAVE MOVED BACK INTO WHAT ARE REALLY NORMAL INTEREST RATE MARKETS, BUT THEY'RE HIGHER, MUCH HIGHER THAN THOSE HISTORIC LOWS.
SO WE ARE NOW MORE IN AN INTEREST RATE MARKET OF 3.5% TO FOUR.
UM, WE WE'LL SHOW IN A SLIDE MOVING FORWARD.
WE ALWAYS ASSUME THOUGH, THAT WE'RE IN AN AN INTEREST RATE MARKET THAT WILL INCREASE AND THAT IS JUST TO ENSURE THAT WE HAVE THE CAPACITY TO MEET OUR OBLIGATIONS.
SO ONCE WE ISSUE THE DEBT, THAT IS NOW A COMMITMENT TO THESE INVESTORS TO PAY THAT.
SO WE WANNA MAKE SURE THAT WE HAVE THAT THE TAX RATE ALSO IMPACTS YOUR CAPACITY.
YOU KNOW, THE 2019 BOND PROGRAM, WE HAD A SIX AND A HALF CENT TAX RATE INCREASE TO FUND THAT.
BUT AS ADDITIONAL NEEDS COME IN, AS INTEREST RATES SPIKE AS TAX-BASED DROPS, THAT'S ANOTHER LEVER THAT COUNCIL HAS IS TO INCREASE THE TAX RATE TO ENSURE THAT PROJECTS GET COMPLETED.
AND THEN ALSO WE HAVE CHANGE IN PROJECT COST.
AND THIS REALLY CAME TO LIGHT WITH THE, THE SUPPLY CHAIN SHORTAGES INFLATION THAT WE EXPERIENCED AFTER COVID.
AND THAT'S WHY WE HAVE INFLATION RESERVES NOW IS BECAUSE INFLATION HAS REARED ITS UGLY HEAD OVER THE LAST COUPLE OF YEARS AND HAS SIGNIFICANTLY IMPACTED SEVERAL OF OUR PROJECTS.
SO INCREASED COST ALSO, UM, CAN CAUSE LESS CAPACITY FOR ADDITIONAL PROJECTS.
AND ONE THING NOT LISTED HERE THAT I'LL TALK ABOUT BRIEFLY, UH, IS BOND RATINGS AS WELL.
SO AS BOND RATINGS GO DOWN, THEY PLAY INTO THIS INTEREST RATE CATEGORY.
SO IF A BOND RATING GOES DOWN, UH, THE INTEREST RATES WILL GO UP.
AND I'LL GO OVER IN MORE DETAIL AS I AND TALK THROUGH UM, WHAT WE'RE SEEING WITH WHEN IT COMES TO BOND RATINGS HERE IN JUST A LITTLE BIT.
THIS SLIDE SHOWS OUR TAX BASE GROWTH IN THE GREEN IS THE LAST THREE YEARS.
AND YOU CAN SEE THEY WERE SIGNIFICANT.
SO IF YOU WERE WONDERING WHY WHEN WE LOOK AT THE DEBT DONUT, AS WE CALL IT, THERE'S OVER $500 MILLION OF ADDITIONAL CAPACITY FOR FUTURE NEEDS.
THOSE THREE YEARS PLAY RIGHT INTO THAT.
SO WHEN YOU HAVE A TAX BASED GROWTH SIGNIFICANTLY ABOVE OUR, OUR HISTORICAL NORM, WHICH IS THAT RED LINE THAT IN THAT HAS CREATED THE CAPACITY TO DO ADDITIONAL PROJECTS.
HOWEVER, MOVING FORWARD, WE ARE ALWAYS CONSERVATIVE ONE IN OUR PROJECTIONS ON TAX BASE.
BUT TWO, I WANNA MAKE COUNCIL AWARE THAT BASED OFF OF HOUSING PRICES IN THE MARKET WE'RE SEEING RIGHT NOW, WE ARE ANTICIPATING THAT THE TAX BASE GROSS WILL NOT BE AT THESE HISTORIC LEVELS MOVING FORWARD.
AND IN FACT, IN 2026 WE ARE PROJECTING A 4.9% INCREASE.
AND REALLY WHAT THIS IS RELATED TO IS THE CARRYOVER OF WHAT WE CALL CAP LOSS FROM THE PREVIOUS YEAR.
SO THE ASSESSED VALUE OF YOUR HOME CAN ONLY GO UP 10% PER YEAR.
BUT WHEN YOU SEE 16.4%, 12.7 AND 11.2, THERE'S A PORTION THAT'S CALLED CAP LOSS THAT WILL ROLL OVER TO THE NEXT YEAR.
BUT AFTER THAT, WE ANTICIPATE IN ACTUALITY THAT THAT RED LINE, OUR HISTORICAL NORM IS WHERE WE WILL BE.
BUT AGAIN, FROM A DEBT MODEL PROJECTION METHOD, WE ARE WELL BELOW THAT BECAUSE WE WANT TO ENSURE THAT WE HAVE THE CAPACITY TO MEET OUR OBLIGATIONS, BOTH OUR EXISTING DEBT AND THE UPCOMING DEBT THAT WE HAVE PLANNED.
AND HERE'S A LOOK AT INTEREST RATES.
I TALKED A LITTLE BIT ABOUT HOW IT WAS AT HISTORIC LOWS.
I MEAN IT GOT ALL THE WAY DOWN TO 2.1% IN 2022.
AND REALLY THE KEY HERE IS TO LOOK AT WHAT FROM FEBRUARY TO MAY, WHAT HAPPENED.
AND THIS COULD EASILY HAPPEN AGAIN BASED OFF OF FEDERAL RESERVE POLICY.
[00:55:01]
CAN SEE THERE THAT WHEN INFLATION REALLY STARTED TAKING OFF, IT SPIKED QUICK.NOW IT WASN'T A A A A AN OUTRAGEOUS PERCENTAGE, BUT IT WAS A HUGE SHIFT FROM WHERE WE WERE AT.
SO WHEN THAT HAPPENS, WE HAVE TO REACT FAIRLY QUICKLY AND WE, YOU KNOW, AND MANY OF YOU WERE THERE FOR THAT JUNE RETREAT WHERE WE HAD TO, WE TALKED ABOUT HOW INFLATION WAS IMPACTING OUR CIP, BUT THIS IS MAINLY SHOWING TO SHOW YOU WHY WE SHOW AN INFLATION ON OUR INTEREST RATES OUT INTO THE FUTURE BECAUSE IT CAN SPIKE RELATIVELY QUICKLY.
SO MOVING FORWARD, WE ALWAYS ASSUME THAT INTEREST RATES WILL GO UP.
SO AS A COUNCIL, Y'ALL ALL RECALL LAST SPRING WE HAD A DOWNGRADE IN OUR FITCH RATING.
PRIOR TO THAT WE WERE AAA WITH FITCH AND AA PLUS WITH S AND P FITCH MADE A DRASTIC CHANGE IN THEIR RATING CRITERIA AND WHAT THEY DID IS MADE 40% OF THEIR RATING ASSOCIATED WHAT THEY CALLED DEMOGRAPHICS.
AND IT REALLY COMES DOWN TO THREE THINGS, POPULATION GROWTH, MEDIUM HOUSEHOLD INCOME, AND EDUCATION LEVELS OF OUR RESIDENTS.
AND WHAT THEY DO IS COMPARE THOSE THREE THINGS TO THE OTHER CITIES THAT THEY ARE RATING AND DETERMINE WHERE WE FIT COMPARED TO THOSE.
AND BASED OFF THEIR ANALYSIS, THEY CLASSIFIED US AS WEAK.
SO WHEN YOU'RE WEAK IN 40% OF YOUR CRITERIA IS EXTREMELY DIFFICULT TO MAKE UP THAT DI THAT CHANGE IN ANY OF THE OTHER CATEGORIES WHICH ARE FINANCIAL RESILIENCE, WHICH WE HAVE ALWAYS BEEN TRIPLE A IN AND ALSO OUR LONG-TERM DEBT BURDENS.
BUT AS YOU COULD SEE, OUR INTENT IS TO INCREASE OUR DEBT ISSUANCE TO MAKE INVESTMENTS IN OUR COMMUNITY AS WE MOVE FORWARD.
SO WE WANTED TO MAKE Y'ALL AWARE THAT WE DO ANTICIPATE THAT FITCH WILL MAKE A CHANGE IN OUR BOND RATING.
AND WHAT I'M SHOWING YOU HERE IS WHAT A RATING CHANGE MAY LOOK LIKE COMPARED TO AAA.
SO AAA IS THE HIGHEST RATING YOU CAN RECEIVE.
HIGHEST CREDIT QUALITY OUT THERE, MOVING TO AA PLUS, WHICH WHERE, WHERE WE ARE AT RIGHT NOW, WHICH IS A SLIGHTLY LOWER CREDIT BUT STILL EXTREMELY GOOD.
YOU SEE ABOUT A FIVE BASIS POINT TO 10 BASIS POINTS SHIFT FROM BEING AAA.
THE AA IS WHERE I WANNA FOCUS 'CAUSE WE ARE AA PLUS RIGHT NOW.
AND WITH THE AMOUNT OF NEEDS AND INVESTMENTS WE HAVE PLANNED FOR OUR COMMUNITY, I WANT THAT IS REALLY THE TARGET AREA WHERE I'M THINKING BASED OFF OF DISCUSSIONS WITH OUR FINANCIAL ADVISORS WHERE FITCH MAY PLACE US IN THE FUTURE.
NOT SAYING IT WILL BE THIS YEAR, BUT IN THE NEAR FUTURE IS AT AA.
AND YOU CAN SEE FROM WHERE WE'RE AT NOW AT AA PLUS TO AA, AGAIN THAT'S ANOTHER FIVE BASIS POINT CHANGE.
AND TO PUT THAT INTO FINANCIAL, UH, TERMS ON A BILLION DOLLAR CAPACITY, IF WE ISSUE A BILLION DOLLARS OVER THE NEXT FIVE YEARS, THAT'S ABOUT $150,000 OF INCREASED INTEREST COST PER YEAR.
SO IT'S NOT SIGNIFICANT AND IT'S WELL WITHIN OUR DEBT MODEL AND WELL WITHIN OUR CAPACITY.
HOWEVER, IF WE WERE TO START MOVING FURTHER DOWN THAT LIST, THE CHANGE IN THE INTEREST RATES BECOME MORE SIGNIFICANT.
AND IN FACT AT THAT POINT I FEEL THAT THERE IS STRONG DECISIONS THAT WOULD HAVE TO BE MADE ABOUT THE GIVE AND TAKE ON AND REWARDS OF THE PROJECTS WE HAVE IN PLACE.
BUT AGAIN, WE DID A THOROUGH ANALYSIS WITH OUR FINANCIAL ADVISORS LOOKING THROUGH BOTH S AND P AND FITCH'S RATING CRITERIA IN MINUTE DETAIL.
AND WE FEEL THAT THE AA IS THE AREA WHERE WE MAY BE OVER THE NEXT FIVE YEARS.
SO WE WANT TO MAKE SURE COUNCIL IS AWARE OF THAT.
UM, IF WE WERE STILL WANTING TO TRY TO STAY AA PLUS, I WILL SAY THAT IT WILL REMAIN SIGNIFICANT REDUCTIONS IN THE CIP THAT YOU SEE HERE TODAY OR THE BOND PROGRAM.
AND WHEN I SAY SIGNIFICANT, PROBABLY AT LEAST HALF OF THAT 500 MILLION GONE.
SO IT'S GOING TO BE VERY DIFFICULT.
AND THE REASON AGAIN, IS WHEN 40% OF YOUR RATING CRITERIA IS ASSOCIATED WITH THINGS OUT OF YOUR CFO'S CONTROL, FINANCIAL CONTROL, IT IS EXTREMELY DIFFICULT TO MAKE UP THAT DIFFERENCE.
[01:00:06]
MOVING BACK TOWARDS OUR 2025 PROPOSED CIP YOU HAVE IN FRONT OF YOU, UM, MOVING INTO OUR UTILITY AND INTERNAL SERVICE AREAS, UM, OUR ELECTRIC UTILITY PROGRAM IS THE LARGEST OF THIS CATEGORY AT ALMOST 64% OF OUR 2020, UH, FIVE PROPOSED CIP AROUND 213.8 MILLION FOLLOWED BY OUR WASTEWATER AND WATER UTILITIES.OUR TOTAL UTILITY AND INTERNAL SERVICE PRO PROGRAM FOR 2025 IS PROJECTED TO BE 335.3 MILLION, AN INCREASE OF 21.7 MILLION FROM LAST YEAR.
THE UTILITY PROGRAM AND INTERNAL SERVICE PROGRAM IS PROJECTED TO BE SUPPORTED BY A PROJECTED UTILITY REVENUE BOND ISSUANCE OF 149.8 MILLION AND A CERTIFICATE OF OBLIGATION IN ISSUANCE ALL ASSOCIATED WITH OUR SANITATION UTILITY PRIMARILY FOR EQUIPMENT OF 7.5 MILLION FOR A TOTAL, UH, REVENUE SUPPORTED DEBT REQUIREMENT IN 2025 OF 157.3 MILLION.
IN THIS YEAR'S CIP WE ARE PROPOSING OR CONTINUING THE USE OF SOME OF OUR STORM WATER UTILITY FUND.
UM, THE PROJECTION YOU SAW EARLIER IN THE DEBT DONUT THAT 43 MILLION HAS ALREADY BACKED THESE PROJECTS OUT OF THAT.
WELL YOU REMEMBER WHEN WE CAME TO CITY COUNCIL IN FY 2324 OPERATING BUDGET, WE HAD CLOSER TO 47 40 8 MILLION PROJECTED BASED ON THAT THREE YEAR, UH, GRADUAL RATE INCREASE TO BRING US TO THE METROPLEX AVERAGE AT THAT TIME.
BASED ON THAT STRATEGY, WE'VE BEEN ABLE TO APPLY 5.7 MILLION OF THAT DEBT, ER, INCREASED DEBT SERVICE CAPACITY TO PROJECTS IN THE CIP LEAVING APPROXIMATELY 43 MILLION IN OUR, UH, RESERVES FOR FUTURE YEARS TO BE APPLIED TO DRAINAGE PROJECTS AS STUDIES OR NEEDS ARISE.