City Council Retreat   1/26/2022

Thank you so much.

No problem.

I just want to verify that I'm going to be handling the PowerPoint sharing my screen.

Yes, it is.

I'm in two meetings right now, so I'm also in retirement.

No problem.

I do.

Yep, you're good.

Thank you.

No problem.

Good morning.

Good morning, sorry.

Brian just said he'll just be about five minutes.

I'm looking at the agenda and it says welcome at nine o'clock and call the order at 915.

I did not notice that.

I don't see Ms.

That if you finish up the budget discussion early, we can accommodate, we can either begin your discussion of your meeting rules and procedures or you can take a lengthy break.

We

Well, we've got all counselors.

We've got Sam on.

We've got Ashley on.

I guess we're ready to go.

Yep.

All right.

Well, even though it says 915, call the order.

At 903, I will call us to order.

For a work session, Ms.

I'll go ahead and do it just because we're here.

Councilor Pinkston?

Here.

So we are now called to order.

We have a proposed agenda, which I hope everybody got, that chose us talking about money in the morning and work items in the afternoon.

Any other changes, any changes proposed to the agenda, or should we approve this one as is?

hearing no interest in changes.

I move to approve.

Okay.

We have an agenda.

All right.

So the next item is money, money, money.

and Chrissy and Kevin Roddy are to be leading us off.

Good morning, Council.

Chrissy Hamill with the Budget Office.

Kevin Roddy is here with me today.

For those of you that don't know, Kevin works for PFM and is the city's financial advisor.

So we have a PowerPoint we're going to present to you this morning, and this will be a new technology feat for me.

So I'm going to share my screen and keep my fingers crossed that everything works.

Thank you.

Hey, can everybody see that?

Yes, ma'am.

Off to a good start.

So as part of our presentation this morning, we're going to talk to you about a couple things.

We're going to talk about just a general overview of the budget process itself, talk with council through some budget guidelines.

This is something that we tee up with each budget cycle, have you weigh in on those and make sure that we're headed in the right direction as we develop the 23 budget.

We're going to talk to you about long-term financial policies and an overview of our debt.

We'll talk about the council's operating budget.

And then we'll talk briefly about some expenditure drivers for the 23 budget that are influencing the development of that budget.

Yep, and I also posted this on the budget website under the work sessions tab.

If it's not there yet, once it's approved, it should pop up very shortly for anybody in the public that wants to view this as well.

Okay, so we'll talk about the budget process.

The budget process is basically an ever never ending cycle.

We work on this all year long, sometimes more than others.

And so right now we're sort of in the throes of that.

But this slide here is intended to sort of give you an overview of what the process looks like.

So it begins with staff.

Planning, Forecasts, Submissions, Strategic Planning.

All of those pieces are working throughout the year and help inform us as we work towards developing a budget.

We've talked to you before about several teams of staff that work together all during the year.

We have a revenue team, which

I would stand up to any.

It includes our finance director, our treasurer, our commissioner of revenue, our director of economic development.

We work on those projections all year long.

And I think, you know, those were one of the strengths that helped us through COVID.

That was a daily sometimes changing target.

But, you know, we were able to stay on top of that and address that.

And so those are all very important pieces that help us form a budget each year.

We take that information, staff and the city manager, departments submit their budgets as a proposal.

We spend time meeting with department heads and departments so they can review those budgets with the city manager.

That becomes the basis for our review and development of the budget each year.

We take all that information and that becomes part of what the city manager's proposed budget that is presented to council.

All of those factors sort of feed in to a proposed budget that is delivered to council in early March.

During that time, council then takes that budget.

You will review, you will amend, we'll have work sessions, the public will have input.

and then we'll take that information and council will formally adopt an operating budget for the year.

And as soon as that's done, we have a few short weeks of rest and then we start all over again.

So to kind of put a timeline to that process, August and September is really when we sort of kick off the CIP and we kick off the development process for the budget.

October, November.

That's when departments are creating their submissions.

And then in November and December, we are reviewing those submissions.

Departments are meeting with the city manager and the budget team to review those submissions.

We are formulating projections at that time.

In November, December timeframe, we're also preparing a CIP budget

which we go to the Planning Commission with and you all have a joint meeting to discuss the proposed CIP.

January and February, we're continuing to work on developing the budget, balancing, figuring out what our revenue forecast will look like.

And then in February, we have to advertise our tax rates.

So at this point, we're bumping up to this time schedule in terms of when we need to make decisions if there's an appetite to increase any taxes.

In March, the city manager will present its proposed budget to council, and then throughout the month of March, council will meet with the public, review the proposed budget, make its own suggestions, add its own touch to the budget, and then in April, you will formally make it your own budget by adopting it, and that will become the budget for the following year.

So a couple of things, our city code actually dictates a few things about the budget process.

So, you know, it defines the role of the city manager, which it basically says that the city manager is responsible for delivering and advising you of the budget and the financial situation on or before March 15th of each year.

and that this budget will contain estimates of our needs and resources and present to you a budget that is basically what the city manager views in his or her best judgment as the best path forward in terms of spending money for the next year.

So just sort of a graphic here, again, to reiterate the process, we take the departmental submissions, the budget guidelines that we'll talk about, council priorities that have been set forth, we use projections and forecasts, all of that goes into the creation of the proposed document.

And again, our city code... Excuse me, Chrissy, quick question.

Sure.

And you may get to this later.

I haven't seen the whole slide that you sent.

Can you just spend a few minutes to talk about what those departmental submissions look like?

I mean, does the city manager kind of, you know, say, you know, pie in the sky, what would you like?

Or, you know, is it a little bit more like, you know, this year is going to be a tough year.

Yeah, thanks.

Great question.

So it's a little bit of all of that.

We have an online system that we use internally for our budget submission process.

It's called OpenGov.

Departments go in, they have several years of actuals.

They have a listing of their last year's budget, which we term as sort of the base budget.

BASE, B-A-S-E, I'm sorry.

those budgets and determine if there are, you know, minor things like contractual increases or things like that that are in their normal operating budget that are just normal contractual increases or things that have already happened in the prior year.

They make adjustments for that.

Anything new

that is on top of what's already sort of in their base budget, they submit as a new request.

And that all sort of gets compiled.

And once they submit that, then they meet with the city manager budget team

to discuss those issues, any increases, any new requests, all of that gets discussed.

And then through the process of balancing the budget, the city manager and the budget team will make a recommendation for what gets included and what does not.

So once the proposed budget is delivered to the city council, you, as again, I mentioned that in February, we need to decide on if there's any proposed tax changes.

We're required to advertise that roughly 30 days, or not roughly, we are required to advertise that at least 30 days prior to any public hearing, and that public hearing will happen in March.

and then you are required to adopt a budget prior to April 15th of each year.

So all of these considerations in the city code sort of drive our budget schedule, if you will.

And again, as the graphic here shows, you'll be delivered with a proposed budget.

You'll take the details of that, public input, your own touch, and you'll make recommendations for amendments that will ultimately result in an adopted budget.

So to talk about some important dates, if we back up from that 30 day requirement on the tax rate, February 14 is essentially the magic date by which we will have the budget balanced.

And what I mean by that is that we will know the maximum amount that we are willing to increase our budget.

and we have to put an ad in the paper.

So that's the date we're working for.

March 7th is when you'll actually be delivered the proposed budget.

March 21st is the first public hearing on any tax rates.

So this is the benchmark for the 30-day window.

And I've backed that up just a little bit to give us some extra time in case there are errors or printing problems when we post that ad.

So that's how we got to February 14th.

and then March 4th will be the second public hearing and then finally on, I'm sorry, April 4th and then finally on April 12th we will formally adopt the budget.

We, as I mentioned, we'll spend much of the month of March in work sessions.

So here are some important dates.

And again, this calendar is also on the budget web page.

February 2, you'll have a joint meeting with the school board.

This will be when they will present their budget or their budget proposal to the city council.

On February 3rd, we'll have sort of a kick the sort of official kickoff of the budget work session.

That's when we'll talk a little bit more nitty gritty about where we are with the budget at that point.

March 10th will be the first budget in the series of four budget work sessions and we'll also have a community budget forum.

Typically, each work session is a different topic.

There's one on the CIP.

There'll be one on the vibrant community funds and outside agency funding.

The one on April 7th is typically we mark that as tentative.

Sometimes we need it.

Sometimes we don't.

I just want to clarify one thing, Chrissy.

If you have any intent of including it in the 23 budget, that would be correct.

One thing I would just remind you based on the conversations that we've talked about related to any real estate tax increase, all of the additional costs and that was specifically has been talked about in relation to the school reconfiguration project.

All of the dates that relate to that don't really hit the budget until the 24 budget process.

So that would not, there's not necessarily a need to increase the tax rate for 23 if you're increasing it for the school reconfiguration project.

Okay.

Okay, I just wanted to clarify a few of those as far as like where they fit into timelines.

Chrissy, my question deals with the Vibrant Community Fund.

We've got a work session set for March 17th that would be directed towards the Vibrant Community Fund.

In years past, we have had more than just, you know, an hour, hour and a half, two hours to talk about the VCF procedures and allocations and everything else.

And often, if I'm remembering correctly,

We would have the Vibrant Community Fund presentation at one point, we would get a typically about 100 page document that we need to have mastered by about three days later with all kinds of community input into that process before we ever see it.

I've always been a little bit frustrated at the

the way that we handle the Vibrant Community Fund in how we get to a decision on this.

And I think most counselors have been dissatisfied with the process, in some cases for different reasons.

I may be dissatisfied for a different reason than either Counselor McGill or Counselor Payne expressed last year, but I think they weren't terribly happy with it in all respects either, if I'm remembering correctly.

I'm just wondering whether any thought has been given to what that Vibrant Community Fund process will look like and how we will get enough information to be able to do something other than either rubber stamp or just kind of say, well, okay, here's one issue, let's fuss about and scoot it along.

So I will defer a little bit to Ms.

Marshall.

What I do know is that that group has assembled sort of and begun their scoring process, their review and scoring process.

They are well on their way to recommendations.

I'm not aware, but that doesn't mean that there isn't something happening.

Ms.

Yes, ma'am.

To my understanding, there is no change to the actual procedure.

Again, with vibrant communities, just for the sake of anyone who happens to be on the call, a group of community and staff members review the applications and provide ratings.

Those ratings help the human services team to provide a suggested dollar amount of investment for that particular nonprofit and or particular program.

and then they are presented to council as one big document.

To my understanding, and while we're here, I will reach out to Mr. Hunter Smith to make sure that I am not misspeaking, Mayor.

I do not believe there are any changes for this fiscal year in how the presentation is made.

I can tell you that that team currently being led wonderfully by Misty Graves as an interim

does see that there's always room for improvement in that process.

One of the issues in particular was whether groups such as the drug court or the therapeutic community or the therapeutic docket, whether those kinds of programs even ought to be a part of the vibrant community fund process or whether we ought to simply say those are contractual matters.

We're not going to stiff them because we're part of that contract already.

Is that still going to be part of the VCF process?

If it is, I mean, I thought we had a majority sentiment last year to take it out of the VCF process, but we didn't have a formal vote on it.

And that is something I'm actually, if you see me looking a little to the side, I'm actually trying to log into my applications.

I helped and provided assistance so I could learn more about the process this year, but I focused in on housing and health work.

So I did not, if there is a drug court one, I did not rate it.

I can address those two specifically.

Okay.

I think one of the other procedural issues that we were having issues with was just trying to understand the rating system because what we see is the end result and then we get a lot of pushback as to, well, why didn't this program get fully funded?

And we don't understand what is being rated because we never see the whole application or anything.

We just see the recommendation.

and we don't see the reasons why it was recommended one way or another.

And that gets very, it's hard as a leader to say, well, I'm accepting this because I'm told to.

I mean, it's important for us to understand the why under it so that we can express to people why something rated as rated.

That makes absolute sense.

Again, I will touch base with both Hunter and Ms.

Graves to make sure that I convey that.

In my opinion, I see that as simply providing you all with the scoring rubric as well as an explanation.

I don't see that being terribly complicated or controversial.

I can tell you it's a Likert scale and it asks you questions.

So for example, there's one of, did the program effectively engage needy and underserved populations?

there's a particular Likert scale for that.

So I don't see a problem with us being able to provide that data to you all and also give maybe an additional briefing and being willing to take feedback.

That is the one thing I will tell you that Ms.

Graves and her team is more than happy to do is to take feedback and they're continuously refining the process.

So for example, this is the first year where there has actually been a diversity, equity, inclusion, and justice question

that individual applicants had to answer because we know that's an important criteria for council, but we never asked it before.

So again, just to show that's a change that got made this year to make sure that we're hitting all the notes that council wants to make sure we are investing in organizations who have the following attributes and are doing great things for our community.

Excellent, yeah, because I never wanted it to come across that we're not trusting staff's opinion or the people or the community members who are part of the ratings groups.

But when you're only looking at that end results and you're trying to answer questions from the community as to, well, why didn't this group get it?

It's very difficult if you don't know the underlying why.

Yeah, and I just want to tag in, gosh, probably for 15, 20 years,

I was one of the citizens when we were the city, the county United Way was doing all this together and we would meet, I don't know, maybe a dozen or so times, three or four hours each time and would, you know, make those recommendations to the board of supervisors and city council and so we knew that there would be a certain amount of

Scrutiny or information, but not get into the details that we did, you know, conducting interviews, site visits and things like that.

Of course, I assume we can do that, but, you know, with everything going on, we probably can't get into the level of, you know, work that the committee did.

But I say that to say that I think that we can and should ask questions and ask for a lot more information.

And just looking at the VCF thing again, and it's my last thought on this, the budget work session for the VCF proposals is Thursday, March 17th.

We have a budget work session on March 10th, which is related to revenues and expenses.

Would it be unfair to ask

that we have the 100 pages or so or whatever we would get on the VCF process.

It would be unfair to ask that we receive that by Friday, March 11th so that we could have the weekend to review it, to come and to offer comments or questions, say by the following Monday or Tuesday so that when we have the budget work session on the 17th,

the staff who need to be able to answer our questions at least have those questions teed up for them.

Yes, sir.

I believe that that's reasonable.

And I will, I'm actually pinning an email to our team right now.

And I will add that into the email to make sure that they're aware of your desire to have the document so that you all can message questions.

So that again, those team members are prepared to respond to at least your preliminary questions.

Naturally, you may have more on a second read or once someone answers a question, but I do not see that as unreasonable.

How about other counselors?

Okay.

Let's plan on that.

Obviously circumstances might change, but if nothing else, if we get that schedule and Councillor McGill, it can go off to the National League of Cities meeting, having done her homework.

Thanks.

Ms.

Thank you.

So we want to move on and talk about the budget guidelines a little bit.

These are guidelines that we tee up every year.

They largely have not changed.

But we do sort of reach out to council at this point to make sure that we're headed in the right direction.

So with that, we'll just kind of dig in.

And again, please feel free to stop and let's discuss anyone along the way.

So first thing we do is annually we review all our major tax rates.

We do that in consideration of where we stand.

In terms of our peers, we largely look at our, you know, top five or six that's real estate, personal property, sales, meals and lodging.

Those are also the sort of hot topics that we continue to talk with you about during COVID.

especially meals lodging and sales tax were dramatically impacted by COVID.

I think you'll find with this budget that we are thankful that we're climbing back to pre-COVID levels on those and so we'll talk about that a little bit later.

Again as Councilor McGill brought up if you think that there are things that

the second one is we we yes what would be the process to do that I mean you're not asking us specifically now but I guess the next council meeting or something mayor snook because this seems like a really big question that we need to sort of get a handle on and maybe this isn't the right time to talk about it but at some point in the near future we need to

And I, to follow up on that question, Ms.

Hamill, you had said, if I recall the sentence, something like, this would be the time

You know, I don't know that there's a time that's one better than another.

From my perspective, you know, where we sit in terms of the budget, if we have big ideas for raising taxes to do other things, we certainly would like, staff would certainly like as much time as possible to start working on that, to give you information.

And so, you know, I would say that if you have some ideas and considerations, we could use this time to at least tee that off.

Well, I'm aware of the fact that the assessor is going to be releasing assessment data, I think, tomorrow.

It would be premature for us today to start talking about the assumptions that are going to be built in as a result of that.

But I think that we probably ought to figure on a time fairly soon and maybe the time to talk about it would be the February 3rd work session.

Would that be an appropriate time to talk about?

You said budget development is what's listed as the topic.

Sure.

So why don't we figure that we'll have that substantive discussion during the February 3 work session.

Yeah, because I kind of assumed that we were having to raise taxes this year.

So, um,

beyond school reconfiguration issues, just between the need to make up some grants that are ending, the need to look at collective bargaining and what that's gonna cost us, and anticipation of knowing that we have to also raise, we're struggling to get

you know, people to work for the rates that we are paying.

So we have to have a decision made about what tax rate we want advertised by February 14th so it can be published on February 17th.

Is that right, Ms.

That is correct.

And the idea with that ad is that we can always go down, we can't go up.

So it sets our max.

However, if we advertise a higher rate, we also have to propose a budget that includes a spend plan for that.

Okay.

It's not a matter of saying, oh, well, let's just advertise, you know, five cent increase.

We have to have a plan for how we intend to spend that.

So just an idea and balance the budget to that.

So if we did the budget work session February 3rd, if we had further things to be discussed, we would have a council meeting on February 7th.

All right.

Yeah, just one thing, and this may be more tactical than procedural, but so you're going to get the tax.

We'll have the tax assessment data tomorrow.

It would be helpful to me if there were some, the term they used in the military, wargaming or scenarios or something, hypotheticals played out in terms of given the current tax assessments, if we raise rates by this many pennies, what this would look like in terms of revenue.

So you're stealing our thunder a little bit.

All right.

No, no, no.

No worries.

Great question.

Okay, so got a plan for talking about the tax rates.

Secondly, you know, keep in mind, whatever we're going to develop operational budgets projected within our available revenues.

So that said, you know, as of right now, staff is under marching orders that we're balancing our budget to the current revenues we project with no tax increase.

That's sort of the assumption we're working under now.

So as we continue these conversations, we can figure that out as we go.

Thirdly, we're going to focus on Council's strategic plan goals.

Again, I know later you're going to be talking about this.

For now, we're extending the current strategic plan, and those five goals that are listed here is basically an inclusive community of self-sufficient residents.

a healthy and safe city a beautiful and sustainable natural and built environment a strong creative and diversified economy and a well-managed and responsive organization so as we prepare the budget you'll see throughout the budget document that will be presented to you we will be highlighting things throughout the budget that help meet these five goals

Fourth, sort of working in tandem with the goals, we will be incorporating performance measures that will help assist with decisions and to see how we're reaching those goals.

We also plan to continue the strong commitment to education by continuing the formula of funding 40% of any new real estate and property tax revenue to the schools.

We will continue to invest strategically in employees by providing adequate pay, benefits and training, technology resources, support and appreciation.

Annually, we review the living wage ordinance to ensure that that's where you think it needs to be.

We're currently at $15.

and we also decide that we fund no new programs or major expansion of existing programs without finding a way to fully offset that with either offsetting revenues or reductions in expenditures.

So that's the key for how we balance the budget.

Moving on, we work in the budget to balance reinvestment in the city's existing infrastructure and facilities.

We do that through dollars in the CIP and also throughout the general fund for general facilities repair initiatives.

We adhere to our policy of transferring at least 3% of general fund expenditures or 3% of the total general fund budget to the CIP.

That's the cash funded or PAYGO portion that we've talked about.

We budget a reserve for council strategic initiatives and I have a slide where we're going to talk about that a little bit later.

And then we also balance a fund balance target adjustment to help make sure that we maintain our 17% policy.

The policy is such that we have to maintain 17% of our budget.

17% is what now?

So we have a policy that we maintain a 17% fund balance rainy day fund.

It's often referred to in the general fund.

So it's 17% of the total general fund budget.

14% of that is what we call our

I'm sorry, 3% of that, 3% of the 17, we actually have designated as a downturn reserve fund and per our policy it has restrictions for which we can or cannot use that for and that it must be replenished.

Kevin will get into this a little bit in his presentation too.

So is that

I was looking at the slide and thinking, where does the 17% come in?

Okay.

It is.

I'm sorry, Chrissy.

Is 17% one of the major factors that allowed the city to have that AAA bond rating?

Is that

It is.

So a fund balance and Kevin jump in if I apologize for the rogue phone.

I thought I turned that off.

That is one of the factors that the rating agency reviews.

I'll remind you that several years ago, I'm going to miss the dates, but I want to say it was like 2012.

The city used to have an 8% fund balance policy.

and we've always had a strong fund balance policy, but 8% in relation to our peers is average and 17% is average.

In anticipation of knowing that we were going to be issuing more debt, we actually came back to council and said, hey, as a trade-off for issuing more debt, we'd like to go to the rating agencies and say that we are going to increase our fund balance policy.

and we did that and we raised it.

We had set aside in 2008 some bonds because of the economic downturn that we actually did not end up meeting and we reverted that to increase our fund balance to the current policy we have now.

Yeah, just to clarify some of those numbers, the 8% was your maximum amount of debt service that you could issue.

So your fund balance, so there's two things that are working in combination, the maximum amount of debt you could issue and then your minimum amount of your fund balance.

And so your fund balance was 12%.

And we said, well, we see a lot of debt coming.

and so we raised the 8% to 10% in terms of your maximum death service and simultaneously we bumped up the amount of reserves that you would have in the bank from I believe 15% to 17% so a lot of numbers and in a couple slides

Is there a

some sort of, I guess, historic reason for item 10 there, transferring at least 3%.

It would be awesome, I would think, if we could transfer 4% or 5%.

Is that over into the CIP?

Kevin, do you know if that's a standard for other localities?

Yeah, no, I think you're exactly right.

You know, as we get into the CIP component of this, you know, the numbers are growing larger.

So the more that you can handle with your current budget, the better.

The numbers really vary across municipalities.

Some do more.

Some don't really even do any and that is what causes parts of the problem.

While we're on this slide, the Reserve for Council Strategic Initiatives

My recollection was that we've had a council strategic initiatives fund that was a couple of years ago, like a million dollars, and we've spent it down.

That's correct.

So we have done different things with this account over time.

There were years when we budgeted, you know, a couple hundred, I think at one point it was like $200,000 that was actually included in the budget.

We have added money in there using year-end surplus funds.

We've used it for a whole bunch of, or council has used it for, you know, a whole bunch of initiatives.

As of late, we have not added funds to that because whatever is not spent has carried over from year to year.

See, do we have any, this was actually, I was

Do you have any guidelines for the Council Strategic Initiatives Fund?

I'll tell you what, let me just go ahead and flip to that since we're here.

and because I did add some language here.

So one of the important factors on this account is that it was intended to be for one-time funding.

It was intended to give council some flexibility so that as we balance the budget and as things happen during the year,

or new programs come along or initiatives or events that you want to fund.

It gives you an opportunity to be able to address some of that.

So one-time money, I would say is probably the most important piece of that.

Okay.

Last year, I asked some questions about this strategic investment fund and was told basically there is nothing written down about it, that it has occasionally been referred to as an equity fund.

Yeah, so I think that's correct.

And I would also say that the equity piece sort of came in, I believe, right around the time of the Blue Ribbon Commission, and those kind of things.

And there were actually dollars that were designated and budgeted to the strategic investment account to be used for equity initiatives.

So over time, that's sort of gotten, you know, grayed.

But, and it has is often referred to as either strategic investment account, the equity account.

But it has, it is basically this one account that either through the budget, year end surpluses, or other sources, council has appropriated money here.

And then they have used those funds for

different sort of initiatives.

And, you know, I might say like some of this actually was not, it did not end up being one time.

I mean, we, you know, we've funded some startup things out of that.

So for example, the initial funding for Home to Hope came from this account.

The initial request for the food equity came from this account.

But then we've also funded, you

Um, you know, again, it's, um, in some years we have added money to this account as part of the budget process at the request of counsel or at the discretion of the city manager.

Mm hmm.

Sure.

So this is one of those things that's kind of clear as mud.

Is that coming up in the next page or two?

Not, not really.

So what this is, is, again, we talked to you about our 17% fund balance policy.

So the simple math there is, if our budget was $100,000, we are required to maintain a fund balance that's equal to 17% of the total budget.

So each year, you know, this year our budget might be $100,000, next year might be $110,000, and the next year might be $120,000.

So as your budget increases each year, the expected target increases.

to get to that 17% also increases in dollars.

The percent stays the same, but now it's a percent of a bigger number.

And so because we don't know what that 17, like as we're planning the 23 budget,

You know, we don't know what the 24 budget is going to be.

And we're still working on the 23.

And so this is a balance that is budgeted to help make sure that we are going to meet the 17% target.

So it's basically some planning to make sure that we're going to meet our target.

In some respects, yes.

You know, especially this was important, like in 20 when, you know, COVID hit mid-year or towards the last quarter of the year and revenues did not materialize.

Exactly.

Okay.

So we're going to move into our long term financial policies and

Here they are.

Basically, these are the policies that we'll often refer to as our policy.

These are kind of the benchmark of those.

So again, we talked about the 17%, which encompasses basically the first two bullets here.

We maintain a minimum general fund balance of at least 14%, and we maintain a minimum downturn reserve fund balance of no less than 3% of the general fund.

We maintain sufficient working capital in the utilities funds.

That is essentially about 60 days of working capital.

We stabilize all non-general funds by ensuring they have a positive fund balance.

We have a debt service policy in which as a percent of the general fund total expenditure budget, our policy is that we have a ceiling of no more than 10% with a target of 9%.

and we transfer the equivalent of one cent on the meals tax to the debt service fund to help fund the debt service.

So one of the things that on the 17% fund balance

that we maintain and I just completely lost my train of thought.

So I'm going to actually I'm going to pass it on to Kevin and I'll come back to whatever my thought was.

Okay, wanted to provide you with an overview of the city's outstanding debt.

We currently have 152 million of general obligation debt

but $93.9 million of that is supported by the general fund.

You have $58.4 million that you also issue general obligation bonds for but that's deemed self-supporting because that's relating to the utility system and you have a dedicated stream of revenue that pays that debt service and

The rating agencies actually allow us, if you've got a historical stream of revenue, to not really count that within our debt capacity limits.

And so when we get back a few slides back, when we're talking about debt capacity, we're talking about that $93.9 million of general fund-supported debt.

The city typically issues bonds annually, and Chrissy does a polling of the various departments and looking at the CIP, and we're really looking to fund projects 12 to 24 months out, and the chart there shows you our historical borrowing.

The dark blue is city capital projects.

The light blue is the utility projects that are self-supporting.

And then the red bars are the refinancings.

A typical bond issue has 10 years of call protection, but up until a few years ago, we were able to refinance bonds in advance of the call date in order to save the city money.

And as you can see on this slide there, since 2012, we've done numerous refinancings and saved about $4.6 million

and cash flow savings.

So we're constantly monitoring the city's debt portfolio and looking for those opportunities to save the city money.

As you can see on that chart too, over the last 10 years, we've averaged issuing about 9.6 million of general funds supported debt, a little larger issue in 21,

mainly due to the fact, really, the timing of COVID and everything.

We didn't issue in 20, so we did basically a double issuance there in 21.

Talk to you a second about the city's bond ratings.

You know, what a credit rating is, is an independent agency's view of the overall credit worthiness and ability to repay debt of the locality.

They try to standardize it to make that the bonds, you

You know, have liquidity.

So an agency or a municipality rated in California versus a municipality rated in Virginia, if they have similar ratings, they should get generally about the same interest rates.

And then the bond buyers can go in and buy them and, you know, may not even know much about the municipality that they're buying.

but they know the credit rating and obviously municipal debt there's very few defaults so they're typically very strong credit ratings compared to corporate debt but they do come in the different rating categories.

Charlottesville has the two highest possible ratings from Moody's and S&P have been rated AAA from S&P since 1964 and from Moody's from 1973.

There's a third rating agency out there, Fitch, that in my opinion the city would be rated AAA.

But you're already getting the lowest cost of financing by having these two long-standing AAAs.

So we've advised there's not necessarily a reason to go out and get the third AAA and pay a rating fee every time you do a bond issuance.

But these are as long-standing AAAs as I personally am aware of.

And, you know, this is something that I have heard many years that, you know, this incredible feat, you know, being so long to have this.

If you can just give me, and I'm sure that the public of anyone who's listening, like an example of what that means when we're borrowing money.

Let's just say for $100,000, if we had AAA, which we have as opposed to

You know, I don't know, a B or, you know, or double A or something like that.

Yeah, it's actually the next the next bullet.

So it allows you to borrow at the lowest possible rate.

And so in this example, you know, your debt portfolio, we said was roughly around 100 million dollars.

If you were AA rated, that would have increased your total debt service by, you know, $3 to $4 million.

And certainly, interest rates have been very low for, you know, the AAA rated entities and the AA rated entities.

So that, I would say that $3 to $4 million is conservative.

If interest rates go up, the gap, the credit gap between

as AAA and AA widens further.

You know, if you took that, you know, the difference between AAA and single A, you'd probably be $10 million worth of debt service or, you know, a half million dollars a year that you'd be paying an extra interest cost.

So, you know, certainly the reason to maintain a high credit rating is allow you to get the lowest possible interest rates.

A secondary benefit that we've seen is that, you know, companies like dealing with highly rated partners.

And so, you know, when Chris Engel is talking to economic development prospects, I think it really does help to come in and know that you're, you know, dealing with a really high credit quality partner.

So we've heard that as well.

So,

It's definitely an advantage.

We take your ratings very seriously.

We talk to the rating agencies annually.

They'll check in.

Kevin, does it also make us a more attractive option?

So I know we don't necessarily

We talk about selling bonds, but I also know the bond market for sales has been a little bit soft.

I know a lot of financial advisors have been advising people to not necessarily invest in bonds because of the low interest rates and everything.

Yeah, I mean, you know, when we offer your bonds in the public, we get great response.

People like the name.

They realize it's a solid, has a solid track record.

And so, you know, when you're

when you're deciding whether you're buying a AAA bond or a AA bond, a lot of the bond funds have certain requirements.

So they'll say 20% of their portfolio is AAA and 30% AA and whatever.

So it does help to fall into that category that attracts people.

You know, others, you know, some others may take a little bit riskier of an investment to get a yield, but we've certainly never had any difficulty selling the city's bonds, you know, when credit events happen, they call it a flight to quality, where

All the A bonds or AA bonds that people were reaching a little bit, trying to get a little bit more yield, they'll come running back to the AAAs because they know that they're going to get their pay.

They're going to get paid.

Certainly, buying municipal bonds is completely different than investing in the stock market.

And so you're doing it because you want guaranteed return on

on your investment versus really trying to make a significant return on your money.

Before we move on, I had one question on the prior page.

When you were talking about self-supporting bonds, if we were to get the sales tax bump for school construction and then issue bonds pursuant to that,

Yes, I believe they would.

We'd have to talk to the rating agencies.

But when you can guarantee a dedicated stream of revenues, that it can't go anywhere else, that it's not council's discretion, then we'll be looking at

You know, and you would have some sort of coverage ratio because sales tax can be volatile.

Who knows if there's a next generation of COVID or anything out there.

But when you have a dedicated stream of revenues, it would be our goal to try to get those to be deemed self-supporting or a dedicated tax.

Thanks.

Chris, on the next slide is really gets to this, you know, between Moody's and Standard and Poor's, they rate thousands of municipalities.

And so the city is one of only 125 nationwide.

And I would say, I think Moody's does about 4,000

municipal ratings.

So, I mean, you are in the real elite company here.

There's 10 Virginia cities that maintain that.

Chesapeake just recently got rated AAA by Moody.

So there have been others joining

This also speaks to, you know, 10 of 125 nationwide is how high quality Virginia government is.

You know, certainly amongst the largest, Maryland, North Carolina has some, and then the rest are kind of spread out.

But, you know, the council should really be proud of the fact that you're

No, it's just Moody's and the two bottom rows are inverse, so there's nothing why that is.

Moody's did it to really designate how they

rate it.

So like the next category for Moody's is big A, little a, one, and then for S&P it's double A plus.

There is no triple A one or triple A plus.

So we're at the highest possible category.

But I think Moody's just did it to distinguish themselves from S&P so somebody could look at it and tell

Fitch uses the same rating methodology as S&P.

So if somebody said, if you saw a big A, two little As and a triple A, three large As, you really, if you didn't know, you wouldn't be able to tell whether it's S&P or Fitch for the other ones.

to Vice Mayor Wade's question on the rating agencies.

They obviously rate the entire city and focus on everything about the city, but there's four key categories here, economy, management, financial, and debt.

So the economy is the one that

of these four rating factors that we really can't control.

It's about 30% of our grade.

And so I tell my clients to really make sure you focus on the other three that you can control.

But the benefit of the economy and why Charlottesville has been so highly rated for a long time is

You know, you've got great anchors in UVA and the hospital as well, just providing great stability in the area.

You know, you also got, you know, very long term, stable employment base, solid property values that continue to grow, you know, strong downtown area.

And so

Every few years we bring the rating analysts down and they're just very impressed with all that's going on in the city, but that's, you know, the economy is the one that, you know, things turn, you know, every report I see and when we do the rating agency presentations, they certainly talk about, you know, Charlottesville being one of the best places to live and relocate your business and all these other things.

So, you know, COVID may actually

The city may be actually a beneficiary of COVID and businesses getting out of the major metropolitan areas, but that's one area that we don't really control.

Management, that's what we're talking about today.

Your policies and procedures, your strategic planning, stuff like this is very important to

You know, council being in line with with staff, you know, obviously, we've had some change and turnover at the city manager level, and we'll get questions on that.

But the, you know, council being on the same page and doing planning exercises like this, and then your core

Staff, having the history and budget and economic development and finance is very important to the management score there.

Financial, the budget that we're talking about, making sure that your revenues

at least meet or exceed your expenditures and then your fund balances.

And you see that to the right, the policy that we talked about a couple of times, maintaining that 17% unassigned fund balance.

They get it.

I mean, they want you to have the rainy day fund

in there.

If, you know, if we ever needed to hit it, you know, your commitment to replenish it.

But having that, you know, if you run in a business, that working capital buffer in there is important.

And then the debt, you know, certainly a major topic for us today.

Our debt position has been extremely low

Any questions on those?

I had one, but Christy, just like you, it just went away.

I'm sorry, it's gone.

I'm sorry.

Okay.

Thank you for not leaving me in a class by myself.

I appreciate that.

Actually, what I was going to mention to you when we were talking about these policies and the 17 percent, one thing that happens every year is that Chris Cullinan, the finance director, comes to you and presents the audit and the year-end results to you.

And we talk about a year-end surplus.

if we've done our job as well, right?

But anything over and above the 17%, we transfer to the CIP as additional PAYGO.

in addition to the 3% we budget for.

And so this has helped and it has also been a good point, talking point during the rating agencies that we continue to invest sort of the one-time money that we identify as a surplus into sort of one-time expenses in our capital project plan.

Are there other things that we've used a surplus for?

I mean, so it sounds like the first component that has to be greater than 17% and then over that you're saying you typically put it in CIP, but there have been other things we've spent it on as well, right?

That's correct.

So that's really the exercise that Mr. Cullinan and his team work on is they determine what the surplus is.

The 17% comes off right off the top because we have to maintain that.

and then the anything over and above that is what he comes to council with and sometimes staff has recommendations things have come up during the year that we need to use some of those funds for sometimes council has things they want to use it for so we talked about

adding funds to the Council Strategic Initiatives Fund.

We've used it for that.

We've also used it for things like science labs at the schools, which were sort of one-time things.

Thanks.

I'm sorry, Brian.

I remember my question.

With that 17%, and I understand that that is like a kind of...

funds that we need to kind of, as a reserve, I assume that is a considerable amount of money and it is or can be, you know, put it away where it can get, you know, interest or, you know, or, you know, we can, it can continue building wealth on top of it.

Yes, your treasurer would be investing any funds that you have on hand.

You have limitations on what you can invest in just as a governmental entity.

You couldn't put it in the stock market.

He does have a list of investments that he can, but certainly trying to grow it.

I mean, as you know, short-term rates have been extremely low.

for the past several years, but will be going up.

Yeah, and that interest is a line item in the budget that we do count in terms of getting to our bottom line.

And so, you know, we always, our attempt is always to budget conservatively.

And we're usually pretty close.

But in years when we're short, you know, or over, that is what sort of gets rolled up and is part of that year end process.

Mr. Hamill, what is the sort of average surplus and I'm not sure maybe surplus is not not the best term to use, but these were leftover.

What is that average been over the last, say, five years?

We do have a chart on that.

And so since I've already messed up numbers on a previous slide, what I'll say is that we typically talk about that in percent because sometimes when you talk about, oh, we had a $2 million surplus, that's a big number.

But when you look at it in terms of a total $190 million budget,

We typically, anything 5% or under, we consider we've done our job well.

Yeah, and I know that's a delicate issue for municipalities of

wanting to get it right.

But I think as you can appreciate going through this whole process, there is a whole lot of moving numbers.

And a few years ago, we would have never even envisioned a COVID year where a couple of your major revenue drivers took significant hits.

So

You know, in Virginia, we're fortunate that real estate is a lot.

But, you know, if you look back to 08 and 09, there's significant movements in those revenue streams as well.

Any other questions before we move on?

Okay, hearing none.

We'll move into sort of an overview of the CIP.

Again, we have presented a proposal or proposed draft of the CIP to the Planning Commission.

Council has had participated in a joint meeting with the Planning Commission on that draft.

and we are still you know the Planning Commission made some recommendations to the city managers and we have been working on those so we'll talk about this a little bit overview of the CIP

For presentation purposes, we're going to talk about a few different subsections of that, which is not necessarily individual projects, but we'll talk to you about this sort of authorized but not issued.

So these are projects that through various CIPs, the Council has designated those as projects that we would plan to sell bonds for those.

Right now we have an authorized but not issued list of roughly $66 million and we'll talk about that.

The second piece is the revised proposed CIP.

So that's the 2023-2027.

That's the five-year plan.

It includes a funding plan for both projects that we plan to sell bonds for and projects that we plan to use the PAYGO or the cash for that we've talked to you about.

And it also includes the $75 million for the school reconfiguration project.

So the current draft of that five-year plan totals 157 million, of which roughly 124 million of that could be bonded.

And then there's this unfunded project list.

That includes capital projects that not just this year, but sort of have had a recurring request that have not made it to the CIP and have not been funded.

We do send that out every year as part of the CIP process.

We send that back out to departments and ask them to confirm that they're still

viable projects that they wish to put forward.

And that list right now currently totals about 127 million.

So as we move to the CIP authorized but not issued list, again, this is just a running list of projects that if you were to go back through prior CIPs, this is a list of projects that were designated in that bondable portion.

Um, and they, these are projects that either haven't started, um, have started, um, and we haven't sold, we've sold some of the bonds, but not all of the bonds, um, have just started and they're not, they haven't, you know, haven't, um, coincided with our bond sale schedule and so they get picked up in the new one.

So there's a little bit of a nuance here in terms of the dollars that you see here.

It's not it's it's not a safe bet to look at this list and say, OK, well, I have general district court at six point seven million.

It's still out here.

And so I'm going to we're not going to do that.

We're going to take that off the list.

And now we've got six point seven million we can buy for something else.

In some cases, you certainly can.

In other cases, it's just a matter of by the time we do the next bond sale, we've probably spent, you know, a couple million dollars on that that we'll be picking up and selling.

So again, this is meant to be a guide.

And basically what this list as a council member is advising you of is these are projects that either were just

So if we looked at the end of this list, for example, some of these are brand new from the 22 CIP and we just haven't been able to get the project into a state where we're ready to sell the bonds because we typically don't sell the bonds until either one, we are incurring the project has started and we're incurring expenses or we know that the project will be started

and all of the money will be spent within 24 months.

So there's a lot of sort of nuance and research to do here, but this should lead as a guide to say, hey, what have we committed to in the past in terms of our bond capacity?

And as we talk about trade-offs and setting priorities, this is a good place to start.

You know, for example,

if you just wanted to pick one and we did the Seventh Street deck in prior CIPs we had I don't remember the numbers exactly but there's at least a million dollars we said we were going to bond for that that we haven't now there was also in the 23 CIP additional money for that project because sometimes we fund projects over multiple years

that you'll see in the next version based on conversations from the Planning Commission, we've removed those dollars out of the new dollars out of the budget.

So again, it's meant to be a guide.

Sometimes there, I know in previous conversations,

Mayor Snook has brought up the idea about lump sum accounts and their big dollars there and why are they still there and not bonded.

Sometimes it's because we're building up a savings and so there might be one project that'll take most of that.

Sometimes in this case because of COVID we had lots of pauses

and delays on projects.

And so they haven't gotten started.

And I know on a previous list, which I've addressed this.

So this was a working list for me.

And every year we have lump sum accounts that we appropriate standing dollars.

We have that for facilities, we have it for schools.

And so we have pots for like FY17 and pots for FY18 and 20.

and as facilities creates their project list they're drawing from different pots depending on how they're assigning those projects but what I did here to kind of and so I had those years listed separately what I've done now is combine that so you'll see sort of lump sums in like here's the last one the facilities lump sum

4.1 million.

Doesn't mean that that's money they haven't spent.

Chrissy, I have a few things real quick.

When I first started on council, we approved a radio system upgrade.

So great question because that kind of leads to what I'm trying to articulate here.

This is a joint project for the ECC radio upgrade project that has been going on for multiple years.

It had a series of delays early on and they're well into that project now.

And so, but we're just starting to get bills for that.

And so because we haven't gotten the bills, we haven't sold the bonds.

So now that we're getting the bills, we'll be selling the bonds for this.

And as they, you know, as that project winds down, we may or may not need all of these.

And then that will get recycled back into calculation that we're going to show you a little bit later in terms of how we figure out what our capacity is.

Okay.

Yeah, correct.

And those are, were not bondable.

And my second point is I see some things on here already that might

we might be able to target with the Build Back Better plan and grants coming in in particular.

I know there's very specific grants coming out for city bridges that are not VDOTs that are actually within the municipality that we can't get VDOT money for.

And it looks like we have a couple of projects that might qualify for that.

I just wanna make sure people are very aware

Yeah, great point.

And, you know, I think that that is one of the things we'll talk about in the CIP work session because again, you know, we have lots of projects and lots of ideas and lots of things in the pike.

We're fortunate in many ways, though, we also have a lot of moving parts in terms of how we can do that.

So, again, this authorized but not issued list sort of reflects prior planning in terms of the CIP, but you'll recall from this past year-end appropriation that Mr. Cullinan brought to you all,

We had deferred our cash transfer to the CIP in 21 due to COVID and we were able to mitigate expenses and everything on the general fund side and so we actually with the year end appropriation put that back in contingency.

So that is cash that is available for you to allocate.

We also have the ARPA funds.

There's a large percent of that that has not been allocated by council yet of the first tranche.

And then also we'll be getting a second tranche.

So there's plans and conversations to happen with that.

I think schools will have opportunities with some federal funding from ARP as well.

And so there's a lot of moving parts and pieces to this.

This is just a general question.

Ms.

Hamill, who is there a

group within the city is that within city manager's office, perhaps that is sort of coordinating all of these various grants from ARP and build back better and sort of keeping an eye on the landscape and how that might backfill some of our projects.

There is.

Our finance director, Chris Cullinan, is the point person on the CARES funding.

He also is the point person on the ARPA funds.

Part of the thing that we're finding out is that the dollars were allocated by

But the rules by which we have to abide in order to spend those have been sort of slow to evolve and roll out.

And so much of this guidance is either still in draft form or just being released.

And he has the onerous task that he wades through a lot of this stuff and that he then filters through the budget team and works with city management and

Is there a document that I could get a link to or something that sort of explains from maybe just the last year or two years sort of

Sure.

I can reach out to Mr. Cullinan on that.

So do I understand that everything that is on this ABNI list

Correct.

I will tell you from my own personal perspective, once we've said yes to it, I kind of forget about it.

I assume that it's going to get done.

And so

While I understand that there are some projects, the Belmont Bridge being one that comes immediately to mind that may have been approved a long time ago, we recently reapproved it with a different amount of money and so on.

I guess, but then when we start talking about budget constraints and are there things from this list that could be deleted, that gets me nervous because it suggests

that just because council said yes to it at some point doesn't actually mean it's going to get done.

It means that somebody, hopefully at the council level, someplace anyway, is riding herd on these things, pushing them along, as opposed to the sense that I get of riding herd and perhaps trying to figure out if maybe we don't have to do that after all.

And I'm just, I'm

I guess where I run into trouble with this is trying to figure out what I'm supposed to do with this list.

Am I supposed to say, gosh darn it, here's $66 million that you should have been spending.

Why the heck haven't you spent it?

Or am I supposed to be looking at it and saying, well, okay, I know we said $66 million, but geez, let's see if we can't cut some of that.

Fair point.

And I think West Main Street is a perfect example of that.

So if we had looked at this list last year, it was a higher number because we had 18 and a quarter million dollars on this list for West Main Street.

We know that there were design work and some preliminary steps, but for all intents and purposes, no work really happened there.

and as we you know started talking about the school project and how could we get to where we need to be that was a perfect project that sort of bubbled to the top that's like hey here's a big number we're sitting on where are we with this this project let's reevaluate so I think sitting in your seat

What I suggest with this list is that you look through here and if there's something that, you know, just as you said, like, why did we allocate, you know, Belmont Bridge is an easy one, for example, $12 million.

Well, we know construction just started.

So you can look at that and say, yeah, I know that's not it.

But what you could say is, hey, undergrounding utilities, $4.4 million.

What is that for?

And let staff come back to you and and tell you, hey, you know, here's 4.4 that's on the authorized but not issued list.

And here's the status of that.

You know, here's why we haven't sold bonds.

And there may be things, you know, the counselor McGill's comment about the 800 megahertz radio system.

Why is that here?

We know we just did that.

Well, that's been on here for a long time, but there's been a lot of delays and that's actually a joint project that we don't have anything to do with in terms of how that progresses.

So I think this is just meant to be a tool for you to be aware of.

Hey, you know, here's things you said you were going to sell bonds on.

It's part of the equation in terms of what we can do in the past, because we can't, you know, we have to, we're trying to define for you, like what your capacity is.

At one level, the temptation is great.

For me, because I have what I've sometimes reduced a bathtub brain, I put it in the plug, I fill it up with everything I need to know on a particular topic.

Once the decision is made, I pull the plug, it all drains out.

can fill it up again and think about something else.

So what that means is if one of the like Belmont Bridge, you know, that's something we already decided.

I pulled the plug on it.

I've it's gone.

And so or perhaps a better analogy would be once we've cast the vote, I think the basketball game is over.

I would say, if you want to use that analogy, I would say there's maybe a couple seconds left on the clock.

Because, you know, I think for the most part, all of these are viable projects that you plan on moving ahead with.

And honestly, if you look through this list, there's really not a lot that you could say, I don't want to do.

or we're not going to do.

So this is not meant to be sort of a wish list for you to kind of go through line by line and say, nope, nope, nope, nope, nope.

Or I'm going to change my mind on this.

I think it's right.

And I think that's a fair assumption that, you know, when a budget comes to you and you all approve it, it's kind of on staff to make that happen.

This, again, is just to make you aware that, hey, this is what you said yes to before.

And it

That is absolutely correct.

I mean, I would say that it's because the list is chronological, but I can tell you like some of these account like the underground and utilities account.

I know that I think I started keeping track of this list in 2006.

And I can tell you that there are dollars that were allocated in budgets.

from 2006 forward at some point for undergrounding utilities.

Now, it doesn't mean they're in this 4.4 million because, you know, as we sell bonds, I'm clicking it off.

But this list is fairly chronological in terms of that because the new projects get added to the end.

So most of this second page, you know, I think Riverview restrooms were like in the 21 budget.

down, you know, so most all of this is the 22 budget.

Oh, 30 years.

Because they obviously have capital needs, they need to project 30 years, but they've made the plans, and they tell us every quarter or so, here's the status of this, this, this, this, and this, so that it reminds us of what's coming.

And once the list is created, it's easy to maintain on a quarterly basis.

It probably was a hassle the first time it had to be done.

Absolutely.

And we are working on that.

My colleague, Brian Ray, if you haven't had an opportunity, I'll make you aware of the Budget Explorer link that's on our budget website that we were just able to recently add that breaks down the general fund budget down to the line item and department level.

We have great plans to do more things like that.

And definitely one of those is the CIP.

And we also are looking at more sort of open data kind of initiatives.

And so we hear you.

We've gotten questions from the public on that.

Ms.

Hamill, is it possible to

Maybe this will be part of the open data project that you just mentioned, the portal, which is actually pretty slick and neat, what's already up there.

But for this list in particular, is it worth staff going through and maybe having a separate column over here to the right of when this was put up, what your sort of best sense of whether this is still a viable

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Yeah, in fact, part of the process that we go through when we get ready to sell bonds every year, we send out a spreadsheet which itemizes all the projects that are quote unquote on the books with their budgets, their expenses, and it goes out to departments and project managers and we ask them to provide us with a status update of that project.

and to also provide us with a spending plan because at that point we use that information to size the bond so we know how many to sell every year so we do that process and we do maintain that you know part of the

One problem with that, or not problem, but one of the tricky points with that is some projects that are really large, we budget over multiple years.

And so sometimes, you know, we may have a budget on the books for three or four years before we ever get the total dollars to be able to

Payne for that.

And so then in other cases, like VDOT projects, which tend to be very large dollar projects, are largely funded by state and federal dollars as passed through from VDOT, but it ends up with very large balances on the books because the funding sort of streams in over their six-year plan.

So

Again, you know, there's lots of moving parts, but we do follow up with staff and staff does provide updates and status updates and spin rate projections on all the projects at least once a year, if not more.

I think one takeaway for today in this planning exercise is I started by saying you had relatively low debt, $94 million outstanding.

If you added this 66 to it of committed projects, whether it's a little less and we get grants or not, we're still in that $160 million range.

So as we move to the next category of the CIP,

We just kind of wanted to reset that base.

We're not paying debt service on this $66 million of authorized unissued, which is good.

I think y'all have taken a very diligent approach of not borrowing until the project is ready to go on municipal bonds.

You really don't want to do that.

There's IRS regulations.

You really want to be spending your bonds within two years of when you

two to three years of when you when you borrow and things do change.

But I think that's I think that's important that we're really kind of in that that hundred and sixty million dollar range.

You know, if we were borrowing, we'd be paying interest.

We wouldn't be earning money on much money on the on the investing of it.

So we'd be losing some money on it.

So I think it's

One question I guess I would have as a procedural one is I don't know how you feel we're doing in terms of time.

I also am noting that the next eight or 10 pages of our slides here

refer to details of the CIP, and I don't know whether it's appropriate for us to be getting bogged down in the nitty-gritty of those projects or whether that's a discussion to have later on in February.

What's your thought?

No, great thought.

The next few slides on the CIP were more or less intended to

just be a reference if we needed to.

So we're going to move through some of those pretty quickly, and it wasn't intended to discuss a lot of detail.

This is just kind of a...

complicated piece of it.

And so, you know, I'll move on to your point.

This is the proposed CIP.

Again, this is what you've seen this before.

This is online.

I'll just point out a few changes that city management and staff have made based on recommendations.

from the Planning Commission to point out just a couple of things.

The one big one is that under bondable projects, under transportation and access, the first draft that we showed to you included roughly about $1.3 million.

I think it was not roughly.

It was exactly $1.3 million for a

that was originally allocated for the parking garage and we had included left that much in the draft to address any agreement that we have with the county on the parking agreement for the courts.

Based on further discussions and recommendations from the Planning Commission, this draft takes that out

That agreement, to my knowledge, has not been finalized and that's still being worked on.

But at this point, we will think that we can address those needs with money that has previously been allocated for the parking garage that will now just be redirected to that agreement.

So that is now gone from here.

couple of other things in on the there was a recommendation to restore the funding for sidewalks.

We did put money back in to level fund that with 22.

And one of the other recommendations were to

Add money back in for to mitigate the ash tree removal process that is now fully funded at the requested rate in this draft.

And additionally, there was a suggestion that we not we reduce the funding in the economic strategic initiatives account that has been reduced both in 23

and slightly reduced in the future years.

So just want to highlight a few of those that based on those recommendations, we are trying to work some of those in.

And so the current draft has changed slightly.

But to get down to a total, we have a five year plan that's, you know, $157 million with just under 120 or just over 124 that that we would see as being eligible for bonds.

um so moving on again we've talked about the unfunded list um all of this is you've seen this before there's no changes here this is sort of a chronological list of things that have been submitted um that are still appear to be viable projects um

You know, to steal the words of of counselor Payne.

This is sort of your list of trade offs.

These are the things that are not in a plan anywhere.

But, you know, are things that based on decisions that you ultimately make and adopting a proposed CIP are left unfunded and would not move forward.

I'm sorry, Chrissy, just a quick follow up to that.

Perhaps, perhaps, yeah.

So to kind of wrap all this together, as you think about how this works, we've talked to you about council's major funding priorities.

Are you putting your money where your mouth is?

And I think we've shown you that chart that had the green highlights.

And in terms of the CIP, we're funding, you know, at levels of

that indicate that your three priorities are education, transportation and access, and affordable housing.

So if we break those categories down a little bit, the middle column where we say revised proposed CIP, you'll see that education is number one,

Affordable Housing comes in number two, and Transportation comes in number three.

So those are things that in the current plan are funded.

That makes up the $122 million of the bondable piece.

Well, not all of it's bondable.

I'm gonna take that back.

That makes up 122 million of the total 157 that we have budgeted.

Then we talked about the authorized but not issued.

And so if we looked at those three categories, like what's on that list that is in the works, and you see that listed here.

And then in terms of what is currently funded,

That is the total of those two, and then what is unfunded.

And you'll see how that falls out in those top three categories.

Ms.

That is correct.

All right.

A lot of numbers on this page and want to make sure that everybody understands this because this is really a key page in our planning process.

The light blue second column bond issuance amount just shows estimated figures.

We just saw a lot of

a lot of capital costs, but we're just making estimated guesses of when we're going to be actually bonding for these amounts, and then when we have to start paying debt service on this.

So, you know, the numbers we were just looking at, and part of this is solving to keep us at right around that 10%, the far right-hand capacity, far right-hand column is that debt capacity.

ratio that we talked about of our goal being in the 9% range, but not to exceed 10%.

And so this kind of says, you know, solves for that debt capacity.

How much can we borrow to keep right around that 10%?

And so the second column over there, if you total all those numbers up, it's $185 million.

which is in the range of that 66 million of authorized but not issued.

And then the 120 to 125-ish of the revised proposed CIP.

And again, not getting into any of the unfunded.

But so this shows a drawdown basis of $25 million issues in 22, 23, 25, six, and seven.

and then the larger borrowing, you know, presumably for schools of $60 million range in 24, you will notice here that in order to, you know, you exceed that ratio.

And so we actually go a couple years without borrowing and then start borrowing at modest amounts.

And we can run whatever examples of this you want.

So

You know, in terms of keeping within the capacity, that number is in $100, $185 million range.

Now, turning the table to affordability, that's really that third column, the annual debt service.

We're currently paying about $11.9 million in our FY22 budget, right there, the highlighted number.

And so as we bring on this debt, it shows if we issue that $185 million of debt, our debt service is basically doubling and we need to find revenue sources for an additional $11 million to pay debt service.

The one other point, and I'll be glad to answer any questions I'd make on this, is that that ratio to the right is incumbent upon our general fund budget.

And we're showing, you know, some healthy growth in the general fund budget, you know, one and a half percent, two percent with meals.

You see a pretty big jump between 22 and 23 for the estimated assessment growth in there.

And then in 24, some sort of tax increase revenue generation to be able to pay for the for the large debt issuance.

The tricky part of this ratio is if the economy turns and our budget contracts at all, our debt service is going to be fixed and our ratio is going to go up because the general fund expenditures either stays flat, doesn't grow or even contracts.

So it's a little bit of a tricky ratio because a tougher economy

Council may make some decisions to tighten up the budget, but that actually hurts that ratio.

And so a lot of numbers on this page, but glad to answer any questions of the methodologies.

Yeah, Chrissy, what are we?

Four percent?

Yeah, I think we tiered that in this one.

Yeah, your current borrowing rate on this issue that's coming up would be in probably two and a quarter rate.

Interest rates have trended up some.

Hopefully, you know, that's a very conservative assumption.

The expectation is that the Fed's going to raise shorter term interest rates and

Who knows what's going to happen with inflation, but that rates are generally trending up.

Yeah, yes, I would agree with that.

They're conservative.

Okay.

Question, please.

So the first question is wondering if this is an appropriate way to conceptualize what we're going to need in terms of the elusive revenue enhancements.

If we take, say, an annual debt service of the last five years or so as roughly $10 million annually, and then we say,

in 2023 or 2022 is when we're starting to be more expansive in terms of programs like affordable housing or schools in particular.

Is it fair to say then that the Delta, the increased revenue that we're going to need to handle those extra commitments, hopefully, is

about $2 million more in 2022, about three and a half.

In other words, just sort of a rough way of thinking about this, the actual commitments or the actual revenue we're going to have to go get up over and above what we've done historically.

That's right.

Looking at this chart on a debt service perspective, that's correct.

Obviously, you want to

understand whether there's any operational costs that come with these various projects that would impact your budget.

And the one thing we'll talk about a little bit later too is you have a debt service fund currently about $11.9 million that Chrissy uses to smooth the increases in there.

So

Yeah, thank you for that.

So I guess just as I'm thinking through this, if this were a spreadsheet that I had and I were to insert a column between the annual debt service and general fund expenditure,

and basically deduct or reduce by $10 million.

The annual debt service has sort of been historic for the last decade or so.

Then whatever that incremental cost is going from roughly 2022 to 2032, that would be sort of the net extra that we were going to have to pay to pull off some of these programs that we want to do.

Yeah, no, I hear what you're saying.

I think that might be helpful information as we're sort of thinking through what the real net add is going to be.

And then the other point you've made about the percentage here that you've got in yellow

So if we, I guess the point there is, even if we feel like we can manage what we're on the hook for with our bonds and debt service, if we have to lower the general fund budget because of a retraction in the economy, that percentage could go significantly higher, I guess, than 10%, even if we're able to meet our basic commitments.

Yeah, you know, the, you know, part of this is it impacts your ability to pay for other things in the budget.

I mean, the 10%, you know, when you think of like 22, it's at 6%.

So you're paying 6% to debt service, you're paying 94% to other things.

And then in, you know, 28, you're paying 10% to debt service and 90% to other things, you know, and so if you shrink the budget, and now that becomes 12% to 88%, I mean, you're having to cut programs, cut pay, cut stuff, because, you know, the debt service is the first bill that you're paying.

And, you know, and then you're doing stuff without it.

So,

You know, I don't want the 10% is it's not a fire alarm if we go over it.

It's just a good practice of what other governments of you need 90% to operate the government and no more than 10% to be, you know, going to debt service or it just starts hurting you because as you, you know, are seeing in your budget.

So much, so little of your budget is really discretionary.

Got it.

Yeah, they're just asking questions.

You know, I think that I think the, you know, everything on your project list is, you know, viable projects and they're tough decisions.

So I mean, you know, it's not this isn't an easy process of you've got to provide these key governmental services, or they should be asking questions about that.

I think the ultimate message here is that

You know, our debt is relatively low today.

We've got a lot of authorized but unissued debt on, you know, valid projects.

So we've got really limited capacity going forward.

And we just want to make sure how we're spending that capacity and knowing that, you know, in future years, you know, we may be constrained.

In this example, a couple years of not borrowing, where at a minimum, the cities typically borrow $10 million a year for just general, you know, even almost maintenance needs.

You know, so like, you know, one thing on the schools, not to pick on them, but, you know, on the unfunded list is Charlottesville High School roof.

And so, you know, that's not on this list.

That's not in these numbers.

And if you said, hey, the next time you have money potentially for Charlottesville High School roof is is 2031.

Yeah, just a couple caveats here too.

I just want to highlight, Kevin pointed this out, but I just want to make sure.

So in the beginning of your question, you talked about adding a column and sort of doing the math.

That is kind of the other half of this table that we'll show to you in the CIP work session.

That is exactly what we do.

But I want to stress, I don't want the takeaway here to be that

This is where we are right now.

There are some assumptions that we're making here that make this work.

And so one of those is, you know, we've built in sort of an anticipated tax increase.

If you look at the numbers through here, you'll see that the general fund is growing and this is building in.

What would it take to keep us at the 10%?

So

And also, in addition, if you were to see the other side of this table, you would see that to get from 11 to 23, we're not only increasing our tax rate to pay for the debt service, but we're also drawing down the $11 million of debt service fund balance that Kevin talked about.

So this table is, like Kevin said, a lot of numbers.

And if you were to look at this table, what we showed you last year, it's

Some of this has changed and where we hit this has changed because there's a lot of variables in play here.

But I just I don't want the takeaway to be, oh, well, we can do this.

We're only at 10 percent.

This chart really was put in there to just show the impact of this future debt.

I mean, the blue bars, historical barring is relatively low.

The red bars, much higher.

And one could argue that those are capital costs, that if those numbers would have been higher,

And I would also just add here, if you look at this graph into your earlier question, you know, when we're borrowing $10 million a year and we're going along and we're able to, you know, we're paying off debt, we're getting new debt, but we're still staying, you know, comfortably below our target.

And then we get here and just in one bond issue, we push up to our max and

We don't really have a lot of room when the general fund contracts or something else comes up.

And this just illustrates that climb in debt service, the blue being your existing, the red being layered on the top, and the steady climb from the 11 to 23.

And then this just uses, you know, this is what I was talking about in terms of how do we pay for this.

We've got the current debt service fund, which is great.

I mean, that's a nice resource and allows you to spread it out a little bit, utilize some of those funds as you build up increased revenues or decreased expenditures and just using real estate as the tax rate as an example.

About 13 cents of the 95 cents goes to debt service, another 82 cents towards operation.

Of course, there's other taxes, all the money goes into one space, but just as an illustrated example of this.

And then the next slide shows you the value that you were asking for.

One cent on the real estate we're estimating is about $927,000.

And so we've got other revenue types on there.

Meals tax, one penny on that's two and a half, or 1% on that is two and a half million.

I think Chrissy has looked at this in the past and your meals tax and your lodging tax are kind of competitive with where others are, you know, certainly sensitive revenues and you'd really want to do an analysis on that before increasing that.

I know meals tax is especially a sensitive issue, but that's one of your larger revenue generators and

property, personal property tax, you know, instead of one penny, I did 10 pennies there because one penny is 23,000.

So, you know, 10 pennies gets you 233,000.

Lodging, 1% is 812.

Cigarette tax, we understand from the treasurer, couldn't be changed.

Um,

without General Assembly approval, I believe, but that's not a ton of money in there.

Kind of the next transition was to talk about the council budget.

So I want to pause here and just, I know we've talked about a lot.

Any more questions?

Could you go back a slide or two that had the red on the top and the back one more?

Yeah, just one second there.

So the blue

And so what you're seeing there is it declines.

Basically, the city has filed the practice of issuing a level principal debt, which means you're paying equal principal installments.

And so you're just paying interest on your outstanding balance.

And so that's naturally going to decline a little bit over time.

and then you have the different years falling off as you go out in the future because we've traditionally issued 20 year bonds.

And so, you know, some of your debt from 2006 and seven and eight starts falling off.

You know, obviously why it's increasing, if we were issuing, you know, 10 million a year every year and we had

basically 10 million issuance rolling off every year, you'd stay flat.

It's jumping because we go from issuing, you know, eight to 10 million a year to issuing 25 million a year.

Just real quickly to summarize is in terms of how I think about it accurate that interpretation of this is that with our currently proposed CIP budget with a 10 cent or so real estate tax increase and depleting the debt service fund that

I would agree.

That's pretty striking and important for, I hope, the community to be aware of.

Any other questions on this section?

Okay, so now we're going to transition a little bit to talk about council's operating budget.

So your piece of the pie, you know, this would be just like a department.

This is your budget.

And so included in your packet, this is a printout from our financial system.

This particular screenshot was as of the 21st.

I don't remember exactly what date I used in the one that was provided to you in your packet.

But this is a snapshot of your operating budget for the 22 year.

So included in the original budget for the council, you have a budget of $318,901.

You can see here there's an itemization of the things that have been spent to date.

You're roughly about 70% utilized.

And so here's where you all can make recommendations, move things around.

I know Kina has consulted with you here on the submission for 23.

This is how you can track your spending.

We can provide this to you at any point.

I don't know what questions you have.

There's one question I had, I'm looking at the available budget column, and it shows $92,000 for temporary salaries.

So the way this works is the $92,000 plus the $7,000 gives you a total salary and benefits budget of $99,000.

Then on the other expenses side, you've got a total budget of $219,000 that gets you to the grand total of the $318,901.

I'm looking in the available budget column.

So, okay, let me explain how this works.

So the original budget column, that is what gets adopted.

That'll be what's in the book.

That'll be what you vote on finally in April.

The budget changes column is anything that happens during the year after we adopt a budget.

So in this case, you'll see that $5,000 and we'll get to that next.

That's actually the council discretionary funds.

and then you get to a current budget which gives you what was adopted July 1, anything that happened during the year and then the

that gives you the current budget.

Then the purchase requisitions and the purchase orders.

That's just a purchasing process that Kina and Max go through when you provide them with the bill to pay.

That's just it's working the bill through the system.

And then you have the actuals.

So it's the current budget minus the purchase requisitions, minus the purchase order, minus the actuals give you your available budget.

So if you were to just not look at the line item details, but look at the bottom line, you had a total budget of 329.

You've essentially obligated about 233,000 of that, either through purchase orders or things that have already been paid out.

and you have $94,000 left to spend.

Yeah, yeah.

So if you look at that example, that's where the budget is, but you can see that the salaries are hitting...

in, I don't, there is something weird here.

Brian tried to explain it before, but I just, it's the way the system was set up for accounting for council's temporary status, but the funds actually come out of what it looks like as full-time salaries.

He explained it at the time.

Yeah, it looks like maybe there's also a line missing here because this accrual, it looks like the full-time salaries are on this report.

So let me provide you with a cleaner copy.

Thank you.

I agree.

Now that you look at these details, there's some math here that's not working.

Well, there's one other, while you're making corrections, if you look at other expenses,

Yeah, this whole thing is weird.

Gotcha.

Okay.

Probably mixed up because we get insurance, the ability to get insurance, while temporary that isn't normally offered to temporary.

Well, all of that comes from the payroll system, which it hits in the right place on the actuals.

It's just probably it looks like we didn't have the budget lined up to the right actuals line items.

And, you know, council essentially approves a total budget by department.

And

even though it's built behind that as sort of the line items you'll see that you know there may be a negative in one line item but there's a positive in another it's so that you're maintaining and the budget control checks are on the budget in total but there's definitely some issue with this report and I apologize for that I should have looked at this more closely instead of just pasting and copying but I'll get you a clean copy that I think would make more sense

I think the point of popping this up here, though, is this is how your operating budget is allocated in terms of line items and things that you all have discretion to spend money on for council as a whole.

And so the conversation here was really intended to be more of is this reflective of what you need?

Is it in the right places?

I did want to note that in the past couple of years, there has not been much traveling for conferences, but this year there seems to be more of an interest.

So the line item for that may possibly need to be bumped up.

We do have three people who are intending to attend the NLC conference in March.

and at least one is expressed interest in the one in the fall.

So that one tends to cost more.

Thank you, Keena.

I was actually gonna bring that up.

The role on the university's council, I have to go to the one

Okay, ribs.

And this line item actually used to be, let's see, let me be more specific.

The non-local travel line item used to be 15,000, but it hadn't been used for years, so we brought it down to 10.

You don't need to decide it today.

What I'll do is I'll actually give you a report without errors and I'll send that to all of you.

And then if you can review that and just get back with Keena on any changes you might want to make.

And one other anomaly I want to point out here is this is, this will be the last year you see this, the contribution to civic group that $155,000 payment that is actually the payment to food equity.

And it was put here because originally it was an off cycle request that went to council that council granted.

And so the budget, when it was appropriated, the budget got put here and that's where it's paid from.

We're actually moving that out to its own account code so it'll appear just like every other agency payment.

Okay, so moving on, I do want to talk about the council discretionary funds.

This was something new that was put in the 22 budget and it was added to the annual budget appropriation.

It is by requirement defined by a counselor.

Every counselor has a pot of money.

So a couple of things here.

At a minimum, we need to take some action to date.

No dollars have been spent out of any of these accounts, I believe.

There was one expense for meals.

I think there was some group that she had convened that she wanted to pay a lunch for, something like that.

And I know that when it was circulated to us, none of us had any objections.

It was like 77, what was it?

I don't remember what it was.

It shows up on here someplace.

Yeah, so the way we funded this in 22 was we actually the council strategic account that we talked about earlier, we allocated $5,000 out of that.

And then from that, each counselor was allocated $1,000.

So at a minimum, we need to

bring to council a memo that would reprogram Mayor Walker's account and also Councilor Hill's account to the two new councilors.

But I guess the broader question here for council is, are these accounts you want to keep and you want to maintain them as part of the budget?

Is the thousand dollars per councilor still an appropriate amount?

I mean, I personally do feel that this is an equity issue of allowing people to explore various community meetings, to give people that ability to kind of go on the fly a little bit of leeway without having to come forward to the entire body of council.

and I don't think we really have enough time, enough time has passed to really decide whether or not this is a good way of doing it or not.

Dave Kuntz, So I'm just asking, due to not knowing, this is a response to some of the issues that happened with the meal cards or whatever.

I don't want to drag up the past, but this was sort of a proactive response to that going forward.

Yeah, we didn't have a policy in place that actually stated that we could spend funds on various community events without first getting approval from the entire body of council.

I would add, for a couple of years, people had been spending money on these categories, but there wasn't a clear line item that it was supposed to be, you know, debited from.

Okay.

I'm generally in favor of keeping it.

I think that it gives everyone on council sort of at least an equal starting point relative to constituent outreach or whatever is appropriate to be spent from this.

So I mean, that's at least three votes right there.

I'll tell you, I was opposed to having funds at all, but having decided that we ought to have funds, I think we ought to also then give it a chance to see how it's going to work, because clearly paying money for food and meetings and so on in a time of COVID is not a fair test.

Okay.

Any more discussion here?

We might need to put someplace in the policy Chrissy that on election years this might have to I mean we'd have to look at resetting it for new counselors coming in and that in the policy what we write in is it resets to 1000 taking the previous counselors

or 500 or something that take to give them six months taking the previous counselor that they are replacing pot the two.

No, I understand what you're saying.

I think the only catch point there is we would need to figure out where that was going to come from.

So, for example, if you if you in your last year, if you spent your entire thousand dollars before January one,

I mean, the idea of it coming from the strategic initiative account for the reset amount, but the yearly amount should come from the operating budget.

So having it reset in July still would seem reasonable.

Sounds fine to me.

Yeah, I don't think we have to decide now.

I mean, I've made some notes and we'll put together some suggestions and then, you know, based on your conversation later today, if anything changes and certainly you can make changes as we go.

It's not a ton of money.

All right, we talked about strategic investment account.

I don't recall.

Did we talk about whether this gets re-up, so to speak, every year or that would just happen?

Yeah, I would say we've done a whole combination of things.

There is currently not any new money for the strategic investment account included in our base because over the last few years, we have, you know, added dollars from year-end surpluses and those kinds of things.

So if that is something that council thinks that they would like added to the budget, it would be helpful to know that now so we can build that in.

I have a history that I can send you.

I would say I don't know that an average is really useful because of the things we've used it for.

You know, it's ebbed and flowed.

Yeah, what was the initial investment?

I think it was 250.

As I recall, that was like 2000 or 2002 or something.

It was a long time ago that it first got started.

It did.

And I know right about the time of the Blue Ribbon Commission, like we put a million dollars in there from year end.

And so I could pull it up now, but because I'm sharing a screen, I can't get to it.

But we've got those details.

And you'll see Ms.

Yeah.

She asked whether council should consider an official written policy stating the purpose and uses of the SIA.

I would say definitely yes, because I've been concerned over the last few years that it didn't seem to be regulated at all and people would just sort of get an idea of, hey, I've got something I'd like to spend some money on, what the heck.

Sometimes it was much more principled than that, but

It would be very useful to have a written policy that we would all agree on and hopefully follow.

Got confused for a second myself.

Okay.

So we're winding down.

We've got a lunch recess that we're supposed to come back from at 1230.

Yep.

So the last thing I want to just bring up to you is just a few things that we already know going into this budget.

So these are things that I'm calling, I've coined expenditure drivers.

These are sort of major

Increases that we know we've either already committed to or by formula will happen.

So number one is employee compensation and benefits.

You granted a mid-year pay increase for employees, which we are all very thankful for.

That does add to the base of the budget and that will be accounted for, but that will show up as an increase over 22%.

You know, it continues to be an employee market.

We hear every day, you know, so and so is doing this and employers are being more creative and doing more things.

And we continue to keep an eye on our peers in terms of what they're doing.

And so we'll be talking about that as part of the budget process.

Additionally, Ms.

Marshall has talked to you all about the comp study that's underway, and so that will continue to be a driver for the budget, both in 23 and going forward.

The school's operating budget requests, we know that will be an increase.

You'll be meeting with them on February 2 for their presentation.

We are anticipating assessment increases

and so that formula will increase we also know that you know from the budget last year on their operating side they were they used approximately four and a half million dollars of one-time money to balance their operating budget so that became their base and they've been working really hard to manage that and sort of

reduce the use of those funds.

And so Dr. Gurley and team will be talking to you about that, but that will most likely result in an increase in the budget.

We also made cuts to the budget related to COVID.

We postponed replacing equipment.

We postponed dollars that go to facilities repair.

So as those revenues are starting to climb back up to pre-COVID levels, we also are looking to restore our budget for some of the reductions that we made there.

We've also talked about changes to the CHAP program and the tax relief program.

Commissioner Divers has spoken with you all about some of his ideas there.

And so that will create some increases in the budget.

and then just department requests in general.

You know, we're looking through those and there are contractual increases that have happened and other things that will lead to sort of what I'm terming before we actually are able to get to the new requests.

So very much like the conversation we're having about the CIP, it's a very similar conversation on the general fund side.

You know, this is not unusual.

This is where we land every year when we're in this budget process.

It's where every government lands with their budget process.

There's always more to more wanted and more needed than resources available.

And so again, you know, to

continue that trade-off conversation.

We'll be working through that to, you know, present to you a proposed budget and when we meet next on the 3rd, we'll talk about, you know, what those revenues look like.

We'll have much more specifics and we'll be able to tie some numbers to some of these things as well.

So that's just kind of where we are and I

Appreciate your time today.

I appreciate all your questions, really good questions.

Yeah, I have a question.

Just wondering, so I think in the terminologies of business type entity,

So I guess I'd be like the golf course or the utilities or I'm trying to think of other ones that might be considered business type entities within the city.

How does their budgeting work?

I mean, I haven't looked through all the relevant documents.

I haven't I've not looked in closely to the online portal in terms of what you can see.

but the the sort of high level budget that's in this it's in this thing here I have looked through that and in terms of like the utilities department I I have it so it's a black box I guess in terms of what I can tell

Yeah, great question.

So I'll start with utilities because that's the easiest one.

That process.

So first of all, all of those funds go through the same budget process as we've described here.

They're making their submissions.

They're being reviewed.

The difference is

We spend all of our time talking about balancing the general fund.

They also have to balance their funds.

So anything that they contemplate to spend, they have to have offsetting revenues to cover.

So many times for the utilities, that covers user fees and that's funded by the rates.

You also have funds like social services and DSS and all those.

They're covered either through user fees but largely federal and state dollars.

And so all of and then finally there's a component to that that most of the time there's a transfer from the general fund that helps fund those.

So in that general fund, you know, in the general fund budget book, you'll see transfer to social services.

And, you know, it's a big number, but behind that is also a full complement of a social services budget.

And the general fund contribution is just one piece of that.

So they do balance that.

It is in the budget book, but not at a level of detail that we talk about with

the general fund.

Utilities, however, they are part of this process and you formally adopt a budget.

But the largest expense for utilities is the piece that we get from Rivanna.

And so that does not happen until after we've adopted our budget.

and so because of that our finance director Chris Cullinan and the utilities director Miss Lauren Hildebrand they actually go through an entire rate setting process and they present that study to you and a recommendation and you actually formally adopt that and it's a very detailed look at all of the budgets for gas water

wastewater and stormwater.

And you'll do that in May, early June through a separate process.

And so you'll be getting a lot of information on that at that time.

The others that I mentioned, like the golf course, the one that you mentioned, that happens as part of the parks and rec budget.

Thank you.

Any other questions?

If nobody else has anything, going once, going twice, then I guess we can recess until 1230.

And thank you so much to Chrissy and to Kevin.

You all are, I gather, are not needed for the afternoon.

You can go do something much more interesting.

Thanks for your time.

Thank you all.

Bye.

We will come back to this link at 1230 then.

Is that right?

Okay.

All right.

Have a good afternoon.

Mr. Mayor?

I guess enforced dieting?

I don't know.

Let's see.

We have all counselors, we've got both of our deputy city managers, we've got city attorney, got Ms.

Hamill, who I thought wasn't going to be with us after lunch, but if she wants to stick around, she's always welcome.

Our first item of business

was with Deputy City Marshal, the Deputy City Manager Marshall and also with Robert Bob with input from Keena Thomas and Lisa Robertson.

Ms.

Okay.

So now we've got all of our cast of characters assembled.

Mr. Bob, welcome.

So let's call ourselves back to order.

The first item on the agenda after lunch is a discussion on council work items entitled Who's on First?

Discussion led by Deputy City Manager Marshall and Robert Bob.

All right.

I'm going to share my screen.

And just to be sure that I share this, I've been sort of poking around, looking at what our community is saying, and they will be very disappointed if council does not do a reenactment of the who's on first sketch.

I don't know.

Third base.

All right.

I am trying to share my screen for you all.

Let me know if you all do see the PowerPoint.

You may not write this second.

My computer has decided that it does not want to play nicely with technology today.

And actually, at this point,

Either Ms.

Robertson or Mr. Sanders, would you be willing to share?

My computer would require me to turn off Zoom to reshare.

And I don't know why it's doing this today, but that's how it's feeling today.

But I can go ahead and start our discussion.

For anyone, if you can share, we're gonna start on slide number seven of the deck that I sent last night.

Again, this particular portion is to provide council with some opportunities to have a discussion about work items.

And that would include such things as thinking about how you would like your council manager working relationship to go, thinking about staff capacity and council priorities, as well as your strategic plan and timing considerations.

Please be aware that this really is just an opening discussion.

You all will have additional opportunities to think about your priority and goal setting when you discuss those collective organizational priorities with the Virginia Institute of Government in February and April 2022.

So when we think about your opportunities that you have, we know that there is a divide between what work.

Thank you, Mr. Sanders.

I'm on about slide nine now.

We know that you'll have opportunities when you're thinking about how you would like to move forward with your council manager relationship.

The reason why we bring this up during your retreat is that part of the work you all will be accomplishing in the next six months or so is obtaining a recruiting firm that will match your values and goals for your city manager hire and for what you need in the community, as well as hiring a new city manager.

So this gives you the opportunity to sort of

Know exactly where you all would like to go with your relationship to build your priorities in advance and be ready to utilize that individual as soon as they join the organization once you're done with your hiring process and vetting.

This slide is from the Effective Local Government Manager, which is a textbook that many individuals who will be applying probably have seen.

It's fairly common in most Masters of Public Administration curriculum.

I show this because this would be part of the assumption that perhaps any candidate may have about their role versus council's role.

That doesn't mean that this is necessarily the end-all be-all, but just to give you all an idea of what a

MPA or MPP trained manager may come in, what their perspective might be.

So you'll see on the left hand side of that chart, my left at least, it gives illustrated tasks for counsel and the right hand are some illustrated tasks for your executive or administrator.

And you see that in the middle you have four different blocks, thinking about the mission,

policy work, administration, and our management work.

You'll see that clearly more of the management work will go to your executive, but more of the mission work and quite frankly almost half of the policy work really falls into you all's sphere.

Additionally, on the side are some notes on additional items that again, a city manager candidate may come in thinking of their expectations.

The part that I'd like to share specifically about those bullets is that is from a document that is in your packet and available to the public.

It's chapter eight of an ICMA book about council manager relations, and it's made for the manager.

so what I did was flip them a little bit but keep in mind with ICMA documents again that is a very strong rudder in the profession so again these are ideas that your manager may come in with

Again, doesn't mean they're right or wrong, but it hopefully my goal is to help you all start to think through what you'd like to see in your next executive.

Again, that chapter is available to the public in the documents that have been provided.

And I'm also happy to provide the full book.

It's an ebook, so no trees were harmed in the making of this PowerPoint.

Some things just to really keep in mind as you all move forward and this plays into the next part that Deputy City Manager Sanders will be covering with you all and that's really thinking about your priorities and your goals.

The reason why these are so important is because if those clear expectations are not conveyed to your executive

They're going to really flounder because they're going to be guessing at what you might need or missing the mark completely.

That will also be your guide point for creating the work plan for your executive and measuring their future performance is based on that work plan, which is inevitably based on your goals and priorities.

So when we think through those, again, we've got clear communication as a part because that manager is there to provide you advice.

The manager has experience and education and expertise in certain topics.

They're not there ever to tell you what exactly to do, but they are there to provide you with any sort of background guidance, research that you all may need to make some decisions.

And some of them will certainly be tough decisions.

Some of them will be very much easier, natural decisions for you all to take command of.

We also want to think about having support for the implementation of your priorities through that city manager's work plan and allowing your executive to engage in the day-to-day management of both large and small tasks that's within their role.

Again, this may seem a little rote, sort of silly, but when you think about it again, if you can craft

that work plan and that thought process then everything that that executive should be accomplishing will be to forward those tasks for you and they should be able to report that to you at any time that you all have questions you know ma'am sir or they if we have someone who is non-binary how are you moving towards this goal and that executive should be able to immediately give you all a redux and a rundown

which will be very helpful in knowing where you all are on the goals if maybe you can add an additional goal during that calendar year.

Again that executives there really to make some recommendations on decisions and help formulate your budget that all falls under that big policy block which again is some of those large and small day to day tasks.

An individual may come in expecting that they will be able to share the good, the bad, and the ugly information with you as again their role is to provide advice to counsel.

So making sure that you give parameters as to how you all would like to receive that information and how often is something you may want to come prepared for when again you work with your new executive.

Trust is extremely important.

Another document that was included in the packet and again is available to the public is a blog post that a individual wrote for ICMA talking about some of the fatal flaws and one of the first flaw really is trust.

Any individual you hire, you all should feel as if naturally you all can trust them with the stewarding of the organization and the community and vice versa.

They will need to have that trust to be able to tell you things that may be not only going extremely well, but might be coming up as problematic as an issue.

And then just a final point that I pulled again from that document that's available in full is thinking of providing the support to your executive as they work towards your stated plans.

And that's both in public and in private.

So making sure that the community knows what are your goals and objectives.

that falls into strategic planning currently your strategic plan again included in those public facing documents was extended through 2021 for very obvious reasons but it's now 2022 so it's probably time for you all to think about how you would like to engage and work towards refreshing updating or completely overhauling whatever you all feel those plans that document is always going to be public facing so it's always going to allow your community to know

what ideas you all are moving the organization and the community towards.

It's a really great way to have transparency with the community.

And then that also allows the community to ask questions for you all.

How are we doing on goal two?

How are we moving towards this?

Or even why is this not a priority for you all?

That is a very acceptable question for community to ask.

And

in your strategic planning process, you all probably have mulled over why something didn't make the cut.

But again, that support also provides engagement for your executive to know that they're moving in the right direction, to know that they are driving the ship in the way that you all want them to do.

And if something changes, you get to stop that ship, have that conversation, rework that work plan, and redirect your executive.

This is your team member.

This is

your direct report.

So please don't feel afraid to utilize them to move towards goals, as well as to do some of the legwork for you all again, giving you all that expertise and advice, having them look at that research.

I don't, I don't have anything to add at this point.

I think the overview is excellent.

I think they, it has to be, can't just be a one-time discussion with the city council, particularly around the priorities, council manager relationships.

That's an ongoing discussion.

You see the manager in action at every city council meeting, but I think at

Okay, at points, or should I say a toll gate during the course of a fiscal year, there should be an opportunity to re rethink and to reevaluate where we are in terms of the role of city council, the role of the city manager.

And I'll share that.

That is very helpful advice from leading organizations myself.

The more feedback that my board gave me, the better I was able to fulfill our missions, goals, and objectives, as well as the quicker I was able to pivot when needed, when something else came forward that became a priority.

So I don't, I've never met a manager that doesn't appreciate more communication and conversation than less.

So please never worry about having those conversations with the individual.

But do remember that that individual does answer to all five of you.

So it's also very helpful when those directives or pivot changes come from the body, because it can be very confusing if it comes from one individual.

Not that that one individual couldn't be speaking for everyone, but make sure your manager knows that or they may be a little paralyzed.

So moving forward, we're going to have a little bit of a discussion about what your staff being myself, deputy city managers, and your city attorney, Ms.

Robertson have looked at and determined are some city manager hot topics that again, you all want to consider in your work, but also consider when you all are looking for your next executive.

Good afternoon, everyone.

And I apologize for being slow in speaking, recovering from my surgery, but wanted to be a part of today's activity.

So as you've heard from Mr. Bob, and you've heard from Ashley, and I'm chiming in just along in agreement that part of what we need to do right now is to prepare for our incoming interim city manager who arrived on Monday.

and to help him with being able to step in with a lot.

There's a lot on the table and the conversation could very easily be overwhelming on day one.

It is our desire, of course, to not make that, to make it an informative day of laying out various activities and actions and priorities that may be on the table.

But we know that he comes with great experience along with Mr. Bob's consultation.

to help even determine how to attack all the various things that will be before him.

But what we decided to do was to just kind of prepare in advance what we consider to be the hot topics and narrow those down to three, knowing very easily that there are probably 65 hot topic items that need to be discussed right now in the city of Charlottesville, being perfectly honest.

But when looking at those top three,

First, of course, the FY23 budget.

You just spent half of your morning discussing the budget.

This is priority number one because of where we are in the schedule.

Making sure that we can get the budget completed on time so that it can be presented to council on the timeline is probably mission critical number one.

But along that way, we are looking for the opportunity to engage Mr. Rogers in being able to help us look at the process.

And this would be an opportunity for him to bring his experience to the table and share with us any additional moments that might still be able to be injected into the process to help better inform you all, as well as to allow us to better participate in this process, being our first time as well as the two deputies that are participating.

And then, of course, the big item is factoring in school reconfiguration.

How do we evaluate that and make that final determination for its placement in the budget as that process comes to a conclusion?

So we see that is important.

That's very critical.

And we would want to make sure that we can feed him as much information as we possibly can about this process and provide that engagement with staff so that he gains some comfort and familiarity with what our budget looks like today.

Before we move on from the budget process, what is the strategy for the citizens to have input

or the priority that comes from various segments of the community with regard to the budgetary process.

Are we waiting until the City Council receives the budget and then there is a series of public hearings?

Sometimes along the way in the budgetary process, there are some priorities that bubbles up from the community that may or may not be

controversial but critical to the overall public policy process.

So there are definitely various steps along the way for public engagement.

Chrissy, would you like to speak to anything specifically?

Sure, I can just say that largely the public input on the budget happens once the proposed budget is presented to council in March.

And so through the series of work sessions that happen with council on that, there is always a time allotted for public engagement on each of those issues.

The next priority would be focusing continued focus on the council manager relationship because we believe strongly that that is something that needs to continually have attention paid to it, that it's a building process, that there needs to be some attention focused on providing the assistance to council to consider the qualifications and experience that will help the council select its next city manager.

And because Mr. Rogers is here in an interim capacity, then this would be your opportunity to have a consultant on the job, taking stock of what our current system is, how it's performing, whether it's performing, and then be able to give you that expert opinion back along the way as you're preparing to select a search firm, put out the various RFP to solicit candidates, and then in your interviewing process, you'll have that feedback.

We also want to make sure that he has the ability to hopefully modernize the city manager's office.

And that simply is just to help us make sure that the various changes that have been enacted in the formation of a deputy city manager that's focused on race, equity, diversity and inclusion is fully integrated into the organizational structure that we determine that we do need three deputies or some other configuration.

that some of our key departments are structured in a way that they are set for success.

We will have the ability to utilize this relationship with him to help inform us on changes that we need to be made.

We're not necessarily sure that they will require any policy action, but because certain things that have been implemented have been more priority based from council members, then the consultation with council would probably be required before we would make certain changes.

And then we want to always make sure that we're trying to present an empowered staff.

The desire here would be to work with council to ensure that city staff through the city manager can be utilized to provide support and assistance with decision making.

Our goal would be to make sure that as staff members come before you in council meetings, they come prepared, they come with the information that they need to bring, and they're prepared to answer questions.

that are all able to help you make the decisions that need to be made.

Nothing is 100%, but we want to make sure that those recommendations or staff support reports, et cetera, of those things are non-apolitical.

And just as a reminder, also in that public facing packet are the ICMA rules of ethics that any executive that comes to you, including your deputies, would certainly abide by.