Budget Committee July 07, 2025   7/7/2025

Receive & File

• • Emily Koski
  • 00:00:06
    Good afternoon.
  • 00:00:07
    My name is Emily Koski and I will be the chair of the Budget Committee today.
  • 00:00:11
    I'm going to call to order the Budget Committee meeting for Monday, July 7, 2025.
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    Before we begin the meeting, I want to offer a friendly reminder to all members, staff, and the public that these meetings are broadcast live to enable greater public participation.
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    These broadcasts include real-time captioning as a further method to increase the accessibility of our proceedings to the community.
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    Therefore, all speakers need to be mindful of the rate of their speech so that our captioners can fully capture and transcribe all comments for the broadcast.
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    We ask all speakers to moderate the speed and clarity of their comments.
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    At this time, I'll ask the Clerk to call the roll to verify the presence of a quorum.
• • SPEAKER_03
  • 00:00:53
    Councilmember Payne.
• • Emily Koski
  • 00:00:54
    Present.
• • SPEAKER_03
  • 00:00:55
    Lonsley is absent.
  • 00:00:56
    Greenville.
• • Emily Koski
  • 00:00:57
    Present.
• • SPEAKER_03
  • 00:00:58
    Vitau.
  • 00:00:59
    Present.
  • 00:01:00
    Ellison is absent.
  • 00:01:02
    Osmond is absent.
  • 00:01:03
    Cashman is absent.
  • 00:01:05
    Jenkins.
• • Emily Koski
  • 00:01:06
    Present.
• • SPEAKER_03
  • 00:01:08
    Chavez.
• • Emily Koski
  • 00:01:08
    Present.
• • SPEAKER_03
  • 00:01:10
    Chaudhry is absent.
  • 00:01:12
    Palmezano.
  • 00:01:13
    Present.
• • Emily Koski
  • 00:01:15
    And Vice Chair Koski.
  • 00:01:17
    All right, there are seven members present.
  • 00:01:19
    Let the record reflect that we have a quorum.
  • 00:01:20
    I'll also remind my colleagues that we're using speaker management today, so please make sure to sign in.
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    The single item on our agenda today is a report regarding the estimated revenues and expenditures for the 2026 supplemental budget, and I will welcome Jane DeCenza to speak on this item.
  • 00:01:41
    Welcome.
• • Jayne Discenza
  • 00:01:44
    Good afternoon, Vice Chair Koski, members of the Budget Committee.
  • 00:01:47
    My name is Jane DeSensa.
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    I'm the Budget Director in Finance and Property Services.
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    And I'm here today to discuss the 2026 current service level budget calculations.
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    So these are the estimated revenues and expenses for next year's supplemental budget, were we to take no action to increase or decrease the budget.
  • 00:02:06
    differently than in prior years.
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    The current service level this year is not really the starting point for budget decision making, but rather a reference point.
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    In deference to the property tax projections that we'll be talking about throughout this presentation, our budget process this year did not invite new spending proposals.
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    And instead, we focused on constraining growth.
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    Nevertheless, the CSL, the current service level, is an important reference point.
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    This information was also presented to the board of estimate and taxation on June 11th So if you have any interest in further here in further conversation about this topic Welcome to tune in to that meeting as well
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    Information these slides is the result of many months of work by the entire budget team as well as partners throughout finance and the rest of the city The budget division is not all represented here in person today if you are but this presentation demonstrates their work and their service and we're very grateful to have them all
  • 00:03:05
    You'll note that this is a technical presentation We are really focused here on future revenues and expenses and pursuant to the Budget Committee's plans You can expect to hear more about department programs and policy in the fall budget presentations
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    So this is a brief walkthrough of our plan today.
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    So we'll be reviewing the budget framework, estimating those costs of existing city operations that were approved on an ongoing basis last year.
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    Throughout, we'll be comparing to the 2025 adopted budget.
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    We'll talk about expense drivers and why we're seeing the numbers we're seeing.
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    And we'll also spend some time talking about revenues.
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    The focus throughout will be mostly on the general fund.
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    and we will close things out looking at how the revenues and the expenses in the General Fund compare.
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    So moving us into some financial overview and some grounding about our budget overall.
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    I want to emphasize that this is a snapshot in our budget process.
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    It's certainly not a recommendation.
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    You will hear in just over a month a balanced budget coming out of the mayor's shop.
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    And then we will, of course, turn things over to the council for the final phase of the budget.
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    So far, though, we are seeing that expenses are increasing at a faster clip than revenues are.
  • 00:04:36
    So in the general funds, that looks like 3.89% increase on the expense side and the revenue side 3.64% increase.
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    There are many funds that are not yet balanced, but we are seeing a similar situation at play in the broader budget when all funds are considered.
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    There is a modest gap as is typical at this time of year between revenue and expenses and that is largely due to increasing Costs and more modest revenue growth and we'll continue to talk about that throughout this presentation The levee picture I do want to notice significantly improved as a result of the forecasting revenue forecasting process that our team does with city departments and through some revised personnel assumptions around vacancies and
  • 00:05:27
    So while last year we had a much more dire gap between revenues and expenses, it's much more modest this year, so we're in a much more stable position.
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    As we talk about the general fund, I want to make sure we all know where that sits in regard to other funds.
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    So looking at this slide, you can see the largest section.
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    The darker green is the general fund.
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    And then we have special revenue funds, which is where grants roll up to.
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    We have debt service.
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    We have capital projects.
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    The general fund is where we usually have most of our discussion because it is predominantly property tax supported.
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    And is the more flexible fund for use We'll be talking on the next slide about the proportional growth of property tax revenue I do want to note that fund descriptions are located in the budget book If you have questions about any of these categories that are currently shown on the screen You can access that in the fund description section of the budget book and you can always send us your questions as well.
• • 00:06:29
    So
• • Jayne Discenza
  • 00:06:34
    This slide is a bit complicated, but it tells a story of a gradual shift towards the city's reliance more on property taxes, rather than those non property property tax revenues.
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    So we had a question last year, which prompted us to do some research on this topic.
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    So
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    In prior years, prior to COVID especially, the non-property tax levy was the majority of the general fund revenue.
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    We are seeing a slow shift to property taxes being the majority of the revenue in the general fund.
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    And that is probably due to a number of factors COVID being one of them sort of not increasing license fees and things during those years probably plays a role here.
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    But it also just illustrates that we are putting more of a burden on property taxes than our other revenue sources.
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    So going back to our long range financial plan here, this is what was adopted in December of 2024 for our 25-26 biennial budget process.
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    So the red box shows you the 2025 and 26 levy percentages and dollar amounts.
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    So a couple things to note here.
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    As you all recall, there were a number of one-time reductions to the expenditure budget in December.
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    And so that dropped the levy down to 6.8%.
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    That's a percent change calculation from the prior year.
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    Because most of those reductions were one time in nature, you are seeing a bigger swing going into 2026 as our starting point.
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    So a 10.8% change increase in 2026 was the starting point of this budget process.
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    So since then, we've worked on re-forecasting our non-levy revenues and recalculating personnel and internal service charges.
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    And this next slide shows a preliminary updated levy.
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    So were we to make no changes to the programs and personnel that we've committed to in the last budget process, our starting point would be an 11.2% levy.
  • 00:08:53
    So that change between December to this figure is primarily due to increased costs.
  • 00:09:01
    There is still a lot out there that we're finalizing in this last month, so I would not anticipate that we'll see that figure.
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    But some things to note about what we assume in this visual.
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    So we have normal inflation baked in for personnel in the out years, as well as for internal service charges.
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    We do not plan though for new spending so any new spending or pilots or new initiatives that come online are not shown in these figures We also assume that federal funding will continue
  • 00:09:35
    And this view also holds all the other levies flat, which is also subject to budget decision making.
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    So you'll note that the permanent improvement levy line has a lot of swings in it.
  • 00:09:48
    Many of the projects were cut on a one time basis or delayed a year.
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    And so you're seeing a bigger increase in 26 and some congestion for that levy in 2027.
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    We also have a number of pension levies that are being held flat.
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    Those are commitments that the city is in until 2031 in most cases.
  • 00:10:08
    We continue to assess those every year working with the controller to make sure we have enough revenue to cover those commitments.
  • 00:10:17
    And I think 11.2% is well beyond the bounds of what a normal budget process is.
  • 00:10:24
    So what we've heard, I think, consistently from the mayor and also from the council is that that is not an acceptable level.
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    So a lot of our work this year has been focused on bringing that down.
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    So that's something that we will talk about in August and September.
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    This shows our capital improvement program plan as adopted in December so no changes yet You can anticipate a click the capital long-range Improvement Committee's report coming online this week.
  • 00:10:54
    They're just finalizing the chairs letter today So we will send out a notice to all of you about that But capital is is one place where we have really robust public engagement and it's also where people are interacting with the city on a really
  • 00:11:09
    Personal level people are experiencing our roads and bridges are experiencing public art.
  • 00:11:13
    They're experiencing our buildings So we're very happy to support that click process, which is a robust one that committee is Just finishing reviewing about 130 or so capital budget requests for this year their recommendation will inform the mayor's budget and then of course will be distributed to you and
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    If any of you are interested in a more thorough explanation of the capital budget requests, you can find those on the finance website.
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    The CBRs are all there so you can get a full narrative of all of them.
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    For the current service level, you can consider that $267.8 million as the capital current service level for 2026.
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    We will continue to keep an eye on capital, especially with the impact of tariffs and federal funding.
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    We are mindful that costs could increase, and so we're just keeping a close eye on that.
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    So we'll transition now into some details of the current service level.
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    So what do we mean when we say CSL?
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    How do we calculate it?
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    What are the component parts and the main takeaways that you all can understand from each category about why numbers are going up or down?
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    Throughout some of these slides.
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    You'll see references to our city's financial policies Those were adopted in December and we provide those references that you can dig into them further if you like As a reminder those policies are informed by our industry best practices So we look to gap and GFOA as well as our city and state ordinance ordinances to develop those and
  • 00:12:55
    So what is a current service level?
  • 00:12:57
    So a current service level, first of all, is not binding to the council.
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    This is an explanation of where the budget would sit if we made no changes for 2026.
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    So the current service level functions as kind of a reality check and a transparency marker in the budget process because it tells all of us and the public what happens before council or the mayor make any policy decisions.
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    So it is a calculation and budgeting methodology.
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    It's not really a great tool for retroactive analysis.
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    But what it is is provides the framework for what eventually becomes the adopted
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    budget.
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    Without this baseline of the current service level, it can be hard to trace the impact of the decisions that you all make.
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    So again, snapshot in time these figures today, but they do help us understand the impact of policy choices, especially around the property tax levy.
  • 00:14:05
    So this slide shows you a bit of a roadmap of how we develop the CSL.
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    So the point of the CSL is really to establish the cost of continuity of services.
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    There are three expense components that we look at, as well as revenue, of course.
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    So you can see on the far left of the screen, there's personnel expenses are one category of spending.
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    That inflates year to year, because as we know, personnel costs do tend to increase.
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    We have base expenses, which are the non-personnel categories.
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    Most departments have budgets for things like travel and training and office supplies, and those are held flat year to year.
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    and then we have internal service charges which are the costs of IT and rent and those customer driven needs for other city departments.
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    Those are adjusted year over year based on the anticipated costs of providing those services.
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    So in order to develop the CSL, we are
  • 00:15:08
    running many processes concurrently.
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    We place a lot of demands on city departments and so we're of course really grateful for their partnership and the time that it takes to develop the budget.
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    The processes are guided by financial policies which of course you all get to review and adopt.
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    At the start of each biennial budget, so we're in a supplemental year in a biennial budget year We're typically doing a large budget kickoff for departments department heads and budget contacts within the departments where we're giving a training about the specifics of that process What budget capacity looks like and what the policy priorities might be?
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    we gave an abbreviated version of that to department heads this year and
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    Then we're also removing one time spending.
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    So we make sure that only the things that have been committed to ongoing are factoring into our figures going forward.
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    And then we're also updating our personal expenses.
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    So it's kind of a manual process of working closely with HR's data and department data to make sure we have a comprehensive position by position report, which is accurate as of March of the year.
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    And then with internal service funds, that's really one of the more intensive processes that begins in January.
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    We are working with all of the provider departments to estimate their expenses for providing the same level of goods and services to their customer departments.
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    And then we work with them to allocate those costs out according to allocation models.
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    And then lastly, the customer departments are reviewing those charges to make sure that they make sense, they understand what they're being charged for, and that it's being billed to the right place.
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    On the revenue side, we're meeting with subject matter experts throughout the city to update our revenue assumptions.
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    So the conversations are typically around how sensitive or stable that revenue is.
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    Have there been any recent trends in growth or decline?
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    Are there new revenue sources the city needs to consider?
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    And then what sort of internal and external drivers might be impacting these going forward?
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    So each of these processes has now been completed and the next several slides will be going through the categories in more detail.
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    This slide shows you the General Fund current service level expense budget.
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    It's the General Fund only.
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    It's removing transfers.
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    The expense budget is one side of the equation, but we like to look at the current cost of that CSL, the 25 budget rolled forward, before we turn to how to fund those expenses.
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    So most of this slide is focused on the General Fund.
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    Most of our programs are budgeted there.
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    That's where a lot of the policy decisions are happening.
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    And it is important to note here that this is the cost of last year's budget today.
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    It does not include any increases or decreases to existing programming
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    So across all city funds, as part of our technical review, we went through and removed $12 million of one-time or expiring programs on the map to building the CSL.
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    So those one-time things that were adopted for 25 only.
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    That removal is in line with the adopted plan of the last year's budget.
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    And collectively, we also saw that salary
  • 00:18:29
    Payroll and fringe costs increased about 30 million from the 2025 adopted budget.
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    Internal service charges are increasing about 6 million.
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    The 30 million was decreased due to some modifications in how we budget for vacancies, which impacts then salaries and healthcare estimated costs.
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    So policy allows for cost escalation in the personnel and internal service side of the CSL, but the discretionary base, that non-personnel amount, is held flat year to year.
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    And that is in part so that the executive and the legislative body have some transparency about how those things are changing year to year.
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    Moving into personnel, with over 4,000 budgeted full-time equivalent positions in the city, this is a significant portion of our total city operating costs.
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    So we continue to work very closely with human resources and with departments to complete that annual review and make sure we understand which positions and at what step and at what health insurance are they budgeted.
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    We have then a comprehensive position by position workforce plan that drives that budget amount for the following year.
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    So salary and fringe expenses both have increased over what we planned for in the 2025 adopted.
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    Growth in salaries is outpacing growth in fringe expenses.
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    That is largely attributable to collective bargaining agreements as well as some job market studies, agreements.
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    Impact both the steps and cost of living adjustments for positions that are represented by those bargaining units So we do always plan for increases to personnel costs based on growth assumptions that we revisit annually working with human resources labor relations
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    The 2026 General Fund budget for personnel is about $4 million higher than we planned for in December.
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    So that's a reflection of larger than budgeted COLAs in those contracts that have been settled.
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    We continue, of course, to work collaboratively with Labor Relations to make sure that we're planning as best we can for those increases in future years.
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    You may note, because this slide shows two years of actuals and three years of budget, that there are some differences between the actual spend and the budgeted amount.
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    Primarily, this is due to some accounting distinctions where sometimes where we budget is a little bit different than where we spend.
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    So this graph only shows the accounts where we budget salary and fringe.
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    And that would exclude some portions of actual personnel spending.
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    FTE growth is of course a major component of any budget growth overall and so this slide shows you the FTE growth from 2023 through what's planned already for 2026.
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    So you can see that there are already close to 16 positions that are planned to come onto the general fund in 2026.
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    Mostly these are firefighter positions that are coming to the general fund after the expiration of a federal SAFER grant in mid-2026.
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    This only captures position additions as of March, so new positions that are added through the council process or through administrative additions would not be shown in our personnel budget until 27 at the earliest.
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    And I'll turn now to internal service charges.
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    Internal service charges include fleets, IT, rent, self insurance, and also our general fund overhead.
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    General fund overhead is a charge back to our non-general fund departments for the services that general fund departments do.
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    So we ask the departments who provide all these services to generate an expense budget to maintain current service levels.
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    We then review those expense proposals alongside the controller and the CFO, and we make a determination about what is a current service level that's appropriate to fund for the following year.
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    So this is the same process we followed as last year, no major changes to methodology.
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    These charges are about 17% of our total operating expenses.
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    So beginning in January, those departments are estimating their expense costs for providing their services.
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    We do a reasonableness test of those and then those budgets are allocated out to departments according to each internal service department's allocation model.
  • 00:23:17
    So some of the distribution factors are customer department FTE count, historical actuals, some department specific projects, and for workers comp and liability, we get some input from an actuarial consultant, Pinnacle, who submits a report annually that helps inform our numbers there.
  • 00:23:41
    So this chart is an enterprise-wide view.
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    So it's also important to note that changes in personnel costs feed into growth in internal service charges.
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    So as we add positions, we probably need to add workspace or laptops or maybe a vehicle.
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    And so internal service charges are demand driven in that way.
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    Another example would be buildings coming online that then need custodial services.
  • 00:24:12
    So these are increases that are somewhat more opaque but are still really important and have an impact on property taxes.
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    So after all of these cost drivers are taken into account, internal service charges are increasing by a net amount of about 6.5 million between 25 adopted and the 26 current service level.
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    So general fund departments are provided the budget to pay for their internal service charges each year.
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    So there's no impact on their operations, although there is that real impact to expenditure growth within the general fund.
  • 00:24:51
    So to this point in the presentation, we've mostly talked about expenses.
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    And we'll now shift over to talk about revenues, how we're paying for those things.
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    So the roadmap here is to talk a little bit about an all funds view.
  • 00:25:04
    But we will focus mostly on the general fund and some key revenue sources there.
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    And again, a thank you to the dozens of people who worked with Ben Zimmerman on developing this revenue outlook for this year.
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    So this is a view of the enterprise-wide all funds revenue.
  • 00:25:27
    So this includes the general fund as well as grants, special revenue, debt funds, capital, et cetera.
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    Many of those funds are still under development, and there's some final pieces that we need to lock down.
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    So this is just, again, a snapshot.
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    These will all be finalized by the time of budget release next month.
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    Moving to local options sales taxes.
  • 00:25:58
    So this is the primary revenue stream of the downtown assets fund.
  • 00:26:04
    And the visual here shows net lost revenues, but we will be talking more about gross revenues.
  • 00:26:11
    So the difference there is that there are withholdings from the state for things like our stadium debt and also an administrative fee from the Minnesota Department of Revenue.
  • 00:26:20
    So in terms of gross revenues, we surpassed our pre-COVID numbers in 2023.
  • 00:26:28
    That was something like a 10% year-over-year growth.
  • 00:26:32
    We're now, at this present moment, projecting something closer to 7.1% growth, although that may be cooling off due to some of the economic uncertainty that we're currently reassessing.
  • 00:26:43
    So our lowest point in 2020, we were collecting $51 million here.
  • 00:26:49
    We're looking at something like a hundred and fifteen million for next year But again, I do want to emphasize we're continuing to talk to development finance and our colleagues at the Convention Center to make sure we're understanding the economic uncertainty and sort of the consumer picture that's happening right now because that is shifting
  • 00:27:13
    And while we do not have updated finance plans yet, we wanted to show you a visual of the downtown assets fund balance outlook.
  • 00:27:22
    And again, this is maybe a more optimistic view given that we're still sort of assessing the impact of tariffs and economic uncertainty.
  • 00:27:30
    but what you can see here is that we're showing currently a six year outlook from the adopted budget last year of the fund balance in the downtown assets dropping from 83 million down to 57 million in 2030.
  • 00:27:42
    The draft six year plan looking forward in the CSL shows about 85 million in 2026 as a fund balance down to 29 million in 2031.
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    So that all assumes that there's no debt issuance for the convention center and the five-year plan and that our other sales taxes, our non-entertainment tax revenues are performing strong.
  • 00:28:10
    So what could change from this point?
  • 00:28:12
    So we will continue to monitor gross and net receipts alongside Dev Finance and Convention Center.
  • 00:28:18
    We know the Tourism Improvement District could have an impact, and so we're looking forward to that.
  • 00:28:24
    The caution here is that while we can fund economic development work from downtown assets, there may come a time, if we continue at this clip, where that's no longer sustainable because we have gone below fund balance requirements.
  • 00:28:46
    So here we are again at the general fund, excluding all of our transfers and use of fund balance to focus on those external revenues.
  • 00:28:56
    The general fund, again, is the primary focus because it has the most flexibility and is where most policy decision making occurs.
  • 00:29:03
    So our outlook for next year remains slightly positive, forecasting about 7% year over year growth from $615 million to $659 million or so.
  • 00:29:14
    this is
  • 00:29:32
    The main driver here, and this has been a topic of conversation in BET as well, is the revenue that we receive as an offset for the park board's use of overhead costs.
  • 00:29:45
    So historically, we've limited that growth so that they have a more steady, consistent increase.
  • 00:29:52
    We decided this year to revisit the plan there.
  • 00:29:57
    So there have been a lot of ongoing conversations.
  • 00:30:00
    But we are planning on a more significant increase paid by the park board and Then in fines and forfeits, there's also some notable increases there So there is new speeding citation revenue, which should be implemented in August or September of this year those funds are restricted so they can all be used for traffic safety functions and
  • 00:30:23
    On the notable decreases side, so franchise fees came in about $3 million below what we had hoped for in 2024.
  • 00:30:30
    And that's the sort of marginal increase that is associated with the Climate Legacy Initiative.
  • 00:30:39
    And then in the licenses and permits category so our construction code services revenue, which is related to major development activity in the city has seen decreases so in 2023 they had a really low year of only seen about 29 projects come through Planning Commission and
  • 00:30:58
    Last year it was even lower.
  • 00:31:00
    It was only 12 projects that came through Planning Commission The rate of those approvals is sort of a proxy and how we can sort of forecast what development activity might be coming our way So we're projecting reduced revenue in that area
  • 00:31:19
    And the taxes category, so this is our largest revenue stream.
  • 00:31:23
    So you can see property taxes, franchise fees, local sales taxes, and other taxes are all rolled up into this category.
  • 00:31:31
    Property taxes are 53% of our general fund revenue and nearly 88% of this category.
  • 00:31:37
    What we're showing here aligns with the five-year financial direction.
  • 00:31:41
    So a 6.8% property tax increase in 25% and 10.8% in 2026.
  • 00:31:49
    So these figures don't show any new spending or any efficiencies that may be identified in this year's budget process.
  • 00:32:02
    Intergovernmental revenues are the second largest revenue stream in the general fund, and LGA, local government aid, is the majority of this category.
  • 00:32:12
    We are expecting that the 2026 local government aid award will hold flat from 2025.
  • 00:32:20
    So $71.7 million is the total expected receipt.
  • 00:32:25
    We share this award, this LGA amount, with the park board as well as the Municipal Building Commission.
  • 00:32:32
    The Municipal Building Commission's portion is designated in the ordinance at 11.79% of our total award.
  • 00:32:42
    LGA is approximately at the level that it was pre pandemic.
  • 00:32:45
    So for a couple of years during COVID, it dipped down into the mid 60s.
  • 00:32:50
    Before getting back roughly to that close to 72 million in 2024.
  • 00:32:55
    This revenue gets certified in late July or August.
  • 00:32:57
    So we work with our IGR team to understand what to plan for there.
  • 00:33:05
    putting everything together.
  • 00:33:07
    So we started today looking at the different expense category trends and personnel and internal service charges.
  • 00:33:14
    We talked a bit about the base budget, how that's held flat.
  • 00:33:17
    And then we shifted over to the revenue discussion.
  • 00:33:21
    And on this side, we're looking at both of those expenses in red and revenues in green next to each other.
  • 00:33:27
    So this view includes plan transfers in and out.
  • 00:33:33
    And planned use of cash for one-time expenses that were adopted in the December budget vote So this shows 2025 adopted as well as the plan for 26 through 31
  • 00:33:48
    We had several years of influx of resources due to federal and state dollars.
  • 00:33:54
    And now we are facing a different economic picture where we have a lot of uncertainty around inflation, tariffs, and potential loss of federal funding.
  • 00:34:02
    And so we are approaching our plans with perhaps more conservatism.
  • 00:34:09
    And the primary task of our office over the remainder of the year is working with the mayor first to present a balanced budget in August and then with all of you to present and adopt a balanced budget in December.
  • 00:34:23
    Again we are using that current service level not so much as the decision-making starting point but as a reference point and moving to a real focus on growth, constraining growth from the 25 adopted budgets while also making sure we're being clear about our city goals.
  • 00:34:39
    We didn't have an open call for new spending proposals this year so we are clear about our charge which is to limit risk and make sure that Minneapolis remains an affordable place to live in the years to come.
  • 00:34:53
    And so I'll just conclude with a brief timeline of what's just happened and what's about to happen.
  • 00:35:01
    So we're talking today about the CSL.
  • 00:35:04
    In June and July, we've been talking about budget scenarios the departments have submitted to the mayor and engaging in budget decision making around those.
  • 00:35:13
    Of course, we'll have the mayor's budget release in mid-August.
  • 00:35:17
    We will then, pursuant to the budget committee's plan, we'll return in September with an overview of the mayor's recommended budget.
  • 00:35:25
    And then the committee leadership will set a presentation schedule for the fall Typically that has meant that department presentations begin in September and October And that we also start having our public hearings on the budget in the fall months finally wrapping up in December with markup and adoption
  • 00:35:44
    And with that, thank you for your time.
  • 00:35:46
    I'd be happy to stand for any questions.
• • Emily Koski
  • 00:35:50
    Thank you so much for the presentation.
  • 00:35:52
    Any questions from the committee?
  • 00:35:55
    I see Councilmember Cashman has joined us and also Councilmember Choudry as well.
  • 00:36:00
    Councilmember Cashman?
• • Michael Cashman
  • 00:36:02
    Thank you Chair Koski, Vice Chair Koski, and thank you Director DeCenza for the presentation.
  • 00:36:09
    My questions really center around the downtown assets fund.
  • 00:36:12
    I am very confused as to why the five year look back has it dropping when over the last five years it has consistently gone up.
  • 00:36:19
    Can you help explain that a little bit to me and you know from like we ended the year
  • 00:36:26
    and then the budget
  • 00:36:38
    forecasted $85 million to end this year.
  • 00:36:41
    However, I thought I heard you say it was going to end the year at $115 million.
  • 00:36:46
    So can you help correct that for me?
• • Jayne Discenza
  • 00:36:49
    Sure.
  • 00:36:49
    Through the Vice Chair, Councilmember Cashman, a couple different things happening there.
  • 00:36:54
    So in last year's budget process, we decided to transfer a lot more money from the Downtown Assets Fund into the General Fund than we have in previous years.
  • 00:37:04
    During COVID we reduced that transfer.
  • 00:37:06
    There's always been some level of transfer.
  • 00:37:09
    We reduced it quite a bit during COVID because downtown activity was so low.
  • 00:37:14
    We returned to sort of a normal amount of transfer last year and then also did a calculation to see what is all the economic development work in the city that we could reasonably justify transferring downtown assets dollars into the general fund to sort of help offset that work economic development is one of the is is how the state's is what the state allows us to spend those dollars on and
  • 00:37:39
    So we kind of took a maximal approach last year, both in the mayor's rec and then I believe the council did an additional transfer too.
  • 00:37:48
    So that is drawing down the fund balance.
  • 00:37:51
    and so we plan every year to revisit that transfer amount and make sure that we are transferring a responsible amount and also offsetting a lot of the economic development activity that the city is undertaking.
  • 00:38:05
    The $115 million number is the
  • 00:38:12
    local options sales taxes.
  • 00:38:14
    That's an early projection of what we might see in local options sales tax revenue next year.
  • 00:38:21
    So those revenues just flow into the downtown assets fund and then the downtown assets fund is supporting the convention center.
  • 00:38:28
    We also added the Kohl's Center as part of the downtown assets suite last year.
  • 00:38:32
    So there are increased expenses
  • 00:38:34
    in the downtown assets fund.
  • 00:38:36
    And we work with the convention center and development finance to help understand what the what the finance plan is for downtown assets, but there are while revenues coming in revenues also going out out the door to maintain those buildings.
• • Michael Cashman
  • 00:38:52
    So the revenues are expected to be 115 million this year, the fund balance is expected to be 85 million.
• • Jayne Discenza
  • 00:39:02
    So I want to be cautious through the chair Councilmember Cashman about specific numbers because this is again a snapshot So I I don't want to wet us to that figure.
  • 00:39:10
    The 85 million is probably optimistic But we are showing that if we were to continue spending as planned It'd be something like an 85 million dollar fund balance in 26 and I'll let Ben Zimmerman add
  • 00:39:26
    The $115 million is also gross revenue, so we have to take out the withholdings for the state from that figure.
  • 00:39:35
    How much do we have to take out for
  • 00:39:40
    We have 0.9% admin fee with the state Department of Revenue So that was about almost half a million last year and then for the stadium 18.4 million About 20 million projected annual or total over the course of annual annual and
• • Michael Cashman
  • 00:40:11
    Okay, so just a couple follow-up questions on that.
  • 00:40:17
    What is the recommended level of reserves in the fund?
• • Jayne Discenza
  • 00:40:22
    Through the Chair, Councilmember Cashman, I don't have the fund balance requirements for that fund off the top of my head, I don't know.
  • 00:40:29
    We can certainly follow up with you on that.
  • 00:40:31
    It would be in the quarterly financial reports.
• • Michael Cashman
  • 00:40:35
    Okay, I have a couple questions.
  • 00:40:36
    Maybe I'll just get through these and then I can send them to the chair and the clerks for follow-up.
  • 00:40:42
    What is the level of reserves across the fund projected to change over the next five years?
• • Jayne Discenza
  • 00:40:49
    Through the chair, I think when we have an updated budget recommendation and an updated finance plan That's when you're going to get better information on on that rather than the current service level.
• • Michael Cashman
  • 00:41:00
    Okay, and when will we expect that?
• • Jayne Discenza
  • 00:41:06
    In the in the fall once once the mayor's budget is out we have budget decisions Then we'd be able to update that plan It wouldn't be the same release date as the mayor's because it'll take some time for us to work through there's policy decisions in there How much of the downtown assets fund was transferred into the general fund in the last five years?
  • 00:41:26
    sure in the last five years
  • 00:41:31
    That's like each year because you said it went it was a lot more was transferred into the general fund last year than usual I'm sure that's in my notes Yeah, we'll let Ben take a rough guess and we'll follow up with some exact figures
• • SPEAKER_00
  • 00:42:01
    Welcome.
  • 00:42:03
    Ben Zimmerman, budget analyst, Vice Chair Koski, Council Member Cashman.
  • 00:42:08
    Prior to COVID, for a few years the rough annual transfer was about 30 million.
  • 00:42:14
    In the depths of COVID, I believe that dropped down to about 10 to 12 million to help stabilize the fund.
  • 00:42:19
    And slowly it has climbed back.
  • 00:42:21
    I think the most recent year was in the low 40s.
  • 00:42:24
    Like the current budget year, 2025, was in the low 40 million dollar range is my understanding.
• • 00:42:28
    Okay.
• • Michael Cashman
  • 00:42:30
    And then do we have like a five-year projection of how much to transfer into the general fund?
  • 00:42:38
    I see that on the slide right after this it does have it dropping so that's what I'm really trying to get at is like why is it dropping?
• • Jayne Discenza
  • 00:42:45
    Yes, through the Chair, Councilmember Cashman, we do plan for an increased transfer in our five-year financial direction to account for because we are offsetting economic development work, which is, you know, a lot of CPED and arts and cultural affairs type work.
  • 00:42:59
    Those costs are increasing year to year, so we plan for some level of increase to that transfer annually, but of course we would revisit it to make sure that we're accurately recommending an appropriate transfer.
• • Michael Cashman
  • 00:43:12
    Okay, thanks.
  • 00:43:12
    I'm going to send these follow-up questions because I would like to at least see them kind of in writing if you have more specifics too.
  • 00:43:20
    And then just so I'm understanding correctly, so the slide before this is the revenue projections and then this is the fund balance outlook.
  • 00:43:27
    So there's some money coming out of it every year and that's why it's planned to go up with revenues but down in balance fund.
  • 00:43:35
    So the amount that we're planning to take out increases over the next five years.
• • Jayne Discenza
  • 00:43:40
    Through Vice Chair Koski, Council Member Cashman, yes, so the downtown assets fund has both revenues coming in and expenses going out to maintain all of our downtown assets and also transfers that are of increasing magnitude to support economic development work.
• • Emily Koski
  • 00:43:57
    Okay, thank you.
  • 00:43:59
    Thank you, and Councilor Keshen, to the Clerks, we'll just have you email those if that's easy enough for the memo.
  • 00:44:06
    Okay, thank you.
  • 00:44:07
    And I just had one follow-up question on slide 13, I believe, when you talked about the 12 million removal of one-time expenses.
  • 00:44:17
    Could you just go into deeper detail on that, of what that means, and then is there a list of what those expenses are?
• • Jayne Discenza
  • 00:44:27
    Vice Chair Koski.
  • 00:44:27
    So that is really a technical cleanup.
  • 00:44:30
    So in the 25 adopted budget, some of them would have been mayor initiated proposals.
  • 00:44:36
    Some of them were certainly council initiated proposals of one time spending.
  • 00:44:41
    That is only a factor for 2025.
  • 00:44:44
    So if there was a pilot project or something of that nature, we wouldn't count that in our 2026 budget projection because it is one time in nature.
  • 00:44:56
    Oh, so it's not savings.
  • 00:44:58
    It's just got it.
  • 00:44:59
    Okay.
• • Emily Koski
  • 00:45:00
    Thank you I just needed that extra clarity appreciate it and then just to the committee you talked about the click being prepared with their next iteration of their proposal and they are coming on August 4th to this committee to do a presentation as well just for your Your notice so all right Well, I am oh I see consumer cash and back in queue here
• • Michael Cashman
  • 00:45:26
    Thank you, Vice Chair.
  • 00:45:27
    I have another question that I forgot to ask before.
  • 00:45:30
    So this is about the franchise fee.
  • 00:45:32
    Where is that categorized under our revenues?
  • 00:45:35
    Did I see it?
  • 00:45:36
    Did I miss it in the presentation, the franchise fees and the climate legacy initiative expenses?
• • Jayne Discenza
  • 00:45:45
    Through the Chair, Council Member Cashment rolls up into the taxes category.
• • Michael Cashman
  • 00:45:48
    Okay.
  • 00:45:49
    Do we have like a five-year outlook for that as well?
• • Jayne Discenza
  • 00:45:54
    We certainly plan for, because we have a six year budget, we certainly plan.
  • 00:46:00
    We can get you some follow up on what we're anticipating.
  • 00:46:02
    We've had credit to the health department sustainability team.
  • 00:46:06
    They've been going back and forth with the utilities to clarify and refine the numbers and the data that we're getting.
  • 00:46:12
    Working closely with our deputy controller to refine that so I think we're learning a lot more But what we're seeing for 2024 we had hoped for about 10 million.
  • 00:46:21
    We got something closer to eight and a half So so that's something that we'll continue to look at.
• • Michael Cashman
  • 00:46:27
    Okay.
  • 00:46:28
    Thanks.
  • 00:46:28
    I will ask that in the follow-up as well.
• • Jayne Discenza
  • 00:46:30
    Thanks
• • Emily Koski
  • 00:46:32
    All right, I am not seeing any further questions and so I'll ask the clerk to receive and file this report.
  • 00:46:40
    Thank you so much for being here.
  • 00:46:42
    With that we've concluded all business to come before the committee today and if there's no objection we stand adjourned.
  • 00:46:47
    Thank you.