City Council Budget Work Session - Revenues and Expenses   3/7/2024

It's 6 0 1.

The mayor is on his way.

I'm sure that Councilor Snook will be here soon, but we have a quorum and Councilor Payne, Councilor Oschrin and myself are here.

Sure, so good evening, counselors and members of the public.

Just opening statement from me is just to simply remind everyone the purpose of tonight's meeting is to begin to unpack the budget as I presented it to Council on Tuesday night.

It's a chance for you all to ask questions after, of course, a presentation by Ms.

Hamill who loves to make those presentations to you.

But it's a chance for you to ask your questions about things that you're interested in hearing more about.

We'll break down as much of that as we possibly can, take any questions that we need to take with us and get those answers back to you.

There's a series of work sessions, so the goal would be to focus on various key aspects of the budget over the course of those next four meetings.

and then we have a wrap up session if we should need it for any significant matters that may not have been able to be resolved over the course of the series of work sessions or that came up as a part of those work sessions.

But my goal is just to make sure that you have what you need in order for you to consider adoption of the budget on the 9th of April, no later than April 15th if you should make a change on your calendar.

So, Ms.

Thank you.

So just a few things.

We're going to try to keep the presentation fairly short to give you all time for discussion and questions and those kind of things.

So we're going to talk about the revenue changes from 24 to 25, the expenditure changes for 24 to 25.

And then Mr. Collin is joining us to give you an update on the ARP status of the ARP spending and also to revisit the year in surplus.

So this is a slide you've seen before.

This is just an illustration of the general fund annual change from year over year going back to 2010.

The average of all of those years is just under seven million dollars.

You'll see from the chart that over the last few years, the annual increase has been

Dr.

the real estate assessments and then also strong performing revenues for the economically sensitive ones such as meals, lodging, sales.

But this is also to illustrate the idea that while typically the budget does grow every year, there are always chances that it's not at the same level and that it could also reduce as well.

So this was a chart that we showed you Tuesday night.

Again, we talk about the pie and all the pieces of the pie.

This is a breakdown of the categories of the revenues.

The largest part of that is local taxes, which funds just under 71% of the budget.

And from here, we're going to jump into some some more of the designated revenues.

designated revenues will get to that slide in just a minute.

But it's basically revenues like the school contracted services, the money that comes back from Charlottesville City Schools for those services, the money from revenue sharing that we allocate to capital projects, and then also our policy that the equivalent of 1% of the meals tax go to debt service.

So the taxes make up about $16 million of the $23 million increase that has been proposed for $25.

Real estate is $9 million of that.

The numbers here do reflect the two cent rate increase.

In addition to the meals tax that brings in would bring in another $4 million in change and that reflects that a 1% rate increase and then the lodging tax again reflected here is a 1% rate increase bringing in just over a million dollars.

Moving on, business and professional license, building permits and other permits.

Some slight increases here.

I did want to note that for Council Oschrin, I know the rest of you probably know this, but we do have a revenue team that convenes monthly.

It is comprised of the city manager, the deputy city managers,

Michael Payne

do some really good work.

And so that work is what feeds into these projections and how we work through these numbers.

So we will be meeting one more time.

We'll have another month of collections under our belt to add to the trends and to revisit some of this.

And so it is possible that before we adopt the budget, there may be some changes to these numbers that we'll be able to bring back to you.

I'm

as we noted, or as we note in the budget, part of that also goes to the CIP and part of it we use to fund operations.

So that makes up $2 million of that.

In addition, the state numbers, again, the state budget is not final.

And so particularly with last year, a lot of those numbers were were budgeted as flat because we didn't know what was happening.

and so we left them flat and then we got increases which will add to some of the surplus revenue budget that we'll be looking at in 24.

For this year we've made an educated guess of what it might be but their budget process coincides with ours and so it's a little bit hard to know those numbers until they actually finish their process.

Charges for services, fairly straightforward there.

Recreation income continues to be something that is, you know, redefining itself after COVID as they're working through their programs and their master plan.

Ms.

Sammel, can you remind me of the revised asterisks that last column?

So how does that work again?

So we have not typically brought an actual action to counsel for you to formally revise the budget.

But what we have done through the form of our quarterly financial reports is as the revenue team continues to meet during the year, as we look at how our actual trending against the budget, we do know that there are instances in which we are going to do better or we might do less.

And so

That is what is being reflected here in this revised column.

So, for example, if we were to go back up... That's sort of our best estimate where we're going to end up.

Correct.

So, if you take a look at real estate tax, for example, the budget actually includes the $99.4 million.

What we know now, because we will have a half a year of the assessment that was just completed, we are now estimating $102 million.

Good question.

I forgot to talk about that column.

Thank you

These last few sections, transfers from other funds.

Many years ago there was some discussions with Ravana and there was a reserve created for the closing of the landfill.

Turns out that we still have to, Ravana still has to maintain

The landfill and do some monitoring.

And so the city has a portion of that to pay.

We have been buying down our share of that costs by buying down a reserve that we had on the books that we do know that that reserve is going to be running out eventually.

And so we are starting to wean that down, which is the result of the decrease here.

that reserve at last check I think was about a million seven ish.

And so that's why there's a decrease here.

Interest income, you know, I think last year when we were working on the budget, interest rates were hovering around 1% or so.

And what is it now?

That is the reason for the increased projection and also for the large change that's represented here.

And then for the designated revenues, again, 1% of our meals tax collections per policy is designated to go to the debt service fund.

And then the for the contracts that the city provides to the schools for pupil transportation and maintenance, they pay us for that.

And so those revenues just show here is designated because they really just offset an expense on the other side.

So all of that equates to the $23 million that we are projecting for new revenue in 25 and represents a 10.1% change over 24.

So I'm just going to pause here for just a second.

As you know that we've talked about the current proposed budget includes a 2% real estate tax increase, a 1% meals tax increase, and a 1% lodging tax increase.

An ad has to be published as a notice of the public hearing that you'll be having on March 18th about the tax rates and that has to publish by Monday.

And so currently that ad will be advertised as a 3% increase.

You can always go down, but you cannot exceed whatever it is that you advertise.

So I'm just going to pause here for a second and give you all time.

Is that where you want to be?

We have two nights to decide if you wanted to advertise anything else any differently.

Can we maybe make that call at the end of the presentation?

Sure.

So I'm going to move on very similarly to walk you through the expenditure changes from 24 to 25.

Again, I want to emphasize that this chart is all of the big items.

It is not intended to be every single dollar change that is in the budget, but it does represent the big items.

There is a plug figure on here and I'll show you what it is.

But this is the big picture of what has changed.

And so as you know, through conversation, we have increased our contribution to city schools by the $7 million.

The rent and tax relief has been adjusted to reflect the additional monies that may be needed related to the tax increase.

This year is a presidential election year, which means more staffing and more equipment for voter registration.

So that is included here.

Parks and Rec is looking for some contracted services for mulching and custodial services throughout the parks.

And Public Works is using contracted custodial services as well.

And they have all seen contractual increases.

We've talked about the safer firefighters.

There were 15 firefighters that were able to be hired using a safer grant that covered the full cost of those for three years, and then they have to become full freight of the city.

For 24, we added a third of that cost into the budget.

The 25 budget adds the other two thirds of their salaries.

into the fire department budget and weans us off of federal money that no longer exists for those positions.

In addition, we've added a couple new positions in the general fund.

The two firefighters and the two police officers, which we

Mr Sanders presented to you as part of the new anchor team that will be going into place.

Those were four new positions.

Um, in this current year, uh, using vacancy savings, we have added capacity to the city attorney's office through, um, an assistant city attorney position and also a legal pre assistant.

Um, and those two positions will are now added to the base for 25.

They were new this year.

The already accounted for is what we're doing, but now we're recognizing the new budget.

Not adding, not as if these two firefighters and two police officers, those positions don't exist today.

This is a small thing, but obviously we recently indicated that we want to move forward with ranked choice voting for the next municipal election, and they had requested, they felt they would need some kind of advertising.

and community engagement budget for that.

Not yet.

I think those actions came after the budget proposals and after we were well into the proposed budget.

However, I think those are sort of one-time monies that are expenses that we could look to

here in surplus or other pots of money to address that.

Yeah, I just want to how are we going to make sure there and there was and there's still some lack of clarity as to how much is needed.

So that will be part of the process for Taylor even to figure out what a proposal might be.

So we didn't have a number.

So we would have to figure that out.

How many firefighters do we have?

It's in there, yes.

It's for the whole department.

The FTE is for the whole department on there.

I will get that for you.

Okay, and that's similar to our number of police officers as well, right?

There was one reclassification.

There was a position that was in the golf course.

And as the business model of the golf course has changed, that position has now been moved back to the general fund in the Parks and Recreation Department.

And that is the position, this management analyst position that's noted here.

Moving on to the compensation and benefits.

The last year we were just sort of I don't I don't know.

I feel like we've been talking about class and comp forever.

So I want to my time is kind of worked on that.

But it feels like we were just in the beginning stages of that.

We weren't sure exactly everything hadn't been worked out.

But there was some extra money that was left unallocated out of

some additional revenues that we brought to council at the end and so $850,000 was set aside to work on some of that implementation.

That is shown as a negative here because we're rolling it all up into the second line which is the lump sum for the employee compensation adjustments.

This is the

Pot of money that will be used to implement the class and comp portion of the budget.

The collective bargaining contracts themselves, which are also listed here have already been absorbed and are shown in the individual department budgets that are in the book.

And so they are also listed here.

We also implemented, because they were not part of collective bargaining, there was a pay scale implementation for the sheriff's department.

The city's contribution to the health care plan increased by about a little over a million dollars for 25.

And then the retirement cost for the pension plan went up slightly, although the percentages stayed the same.

The payroll is higher, so that went up slightly.

which I would say is part of your efforts at rightsizing the organization.

Correct.

That would be the recommendation.

So just a little, this is a net of all of this.

No, I can't do it in my head.

But I'll say that if you break down

This is the breakdown between the departments just to give you some idea.

So prior to the contracts, the tentatively agree to contracts, the base salaries, let's just say fire was at 13 million.

And after the contract is now 146.

And that's where the 1.5 million came from.

So police and fire are general fund impacts.

People Transportation is a general fund impact.

in a fund all in of itself, although you will see a little bit farther down on the slides that there are additional local dollars that are coming from the general fund going to transit to help cover some of these additional costs.

I can't remember.

Does that number encompass those who aren't

No.

No.

I'm sorry.

We're going to test my math.

So, yeah, I would just offer a commentary here.

It's not really what we're doing right now, but this is what I would say is an investment in a much better organization.

She didn't say much better.

One thing just to clarify a point that might have been susceptible of misinterpretation, I think the question, the statement was made perhaps confusingly as to whether the amount of the

Pay increases for the Fire, Police and Transit covered non-union employees.

But we don't have a mandatory union shop.

I think the confusion is just for management who weren't covered at all in the contract.

That's who we're really talking about.

So next week we're going to have a work session all dedicated to the non-profit agency and outside agencies, but this is a slide that sort of highlights the changes in those areas.

One of the biggest notes is that

Council had a lot of discussion last year about if there was a way to increase the pot of money for the competitive process and there were also some talks about certain agencies that were just

considered to provide sort of fundamental services that we didn't feel like should be competitive.

And so we put that into play this year.

There were some agencies that were deemed to be fundamental that had previously been part of the competitive process.

And in doing so, although the VCF pot basically stayed the flat,

with the amount last year by pulling those agencies out and funding their request separately.

These are increases we're looking at?

So the list at the bottom are the ones that were pulled out?

Correct.

If I do the math on that real quickly, that's about $318,000.

Because their request, we funded their total request.

So their total request were $907,000.

There's a few other increases in that $992,000.

But essentially the fundamental agency is to keep it simple.

Their request totaled $992,000.

Correct.

Do you have a question?

Interagency transfers, the transfer to debt service.

Again, this is mostly or largely a policy transfer.

The transfer to cat right now is in the budget at $1.3 million.

The makeup of that increase includes the three FTEs that were added to help reopen the downtown transit station.

There is a procurement buyer that was added and a transit planner position that was added.

You see the cost of those listed there.

The collective bargaining contract impact was just over $573,000 and then there was roughly $270,000 of other operational increases.

that are happening and we will continue, this will continue to be a theme especially for next year because as transit is starting to spin down their cares and art money we will continue to be having to roll over more local dollars to fill that gap.

Transfer to Human Services is going up just a little over half a million dollars.

$170,000 of that is for the administration of the anchor team.

But part of that administration is also to a payment to a local partner for two mental health.

I think it's two mental health clinicians.

Thank you.

Also, there is pathways, administration costs, which are

Things like the phone system, the computer system, and those administrative kinds of cost.

They are in the house in the human services department.

There are some staff there as well, so that we had used ARC for that.

That is being transferred from the city.

And then there are also some other operational increases there that help make up that transfer.

transfer to social services is also increasing.

Those are basically representative just operational increases.

And I think they have been working on their vacancies as well.

And then transfer to CSA that the

that is actually a decrease.

And I think that is I'm not going to speak to that specifically, but I think that has to do with improvements that we are seeing in the foster care world.

But I'd rather have somebody more professional speak to that specifically.

Um,

Other changes.

You see this other decreases and increases.

That's the plug.

That's kind of these.

The things in this section are largely looking at the city budget overall without itemizing to specific departments.

Employee education overall, all departments is going up about 169,000.

Information technology, computer and infrastructure replacement.

There is a decrease here.

Part of this was honestly probably an oversight.

We have existing funds in that pot.

And for whatever reason, it didn't get it.

We missed it.

on the

Contractual increases for refuse.

We've seen huge increases from our contractor for curbside pickup and also tipping fees.

One of those we had to absorb mid-year out of the year in surplus that you just passed for the current year and this is an anticipated increase that is going to happen in 25.

Well, there's always the ability to consider that.

We have not really

We learned about this

Spring last year that it was going to be significant.

We're also hoping to put it out for bid and see if we can do better.

But it doesn't appear that the market is going to really prove that it's going to drop dramatically.

So there's a chance that we can get the number down.

So we're going to work at this moment, absorbing it, hoping that we can do better by finding another provider or at least negotiating with the current.

And if not, then we may have to approach that later.

Okay, I would be interested in that at some point more.

Yeah, and I think it's like $65 a year for a bucket and then $250 for a sticker.

So there's, I think, room to wiggle on every single one.

I forgot.

He told me there's a lot of different stuff going on.

And then finally, cybersecurity software as IT is working to enhance our cybersecurity procedures and protections.

There is a slight increase there.

and then the designated revenue portion, I'm sorry, the designated expenditure, oops, portion of that, the transfer to capital improvement program.

As you know, we have a policy that increases that transfer, well,

The policy is that we transfer 3% of our general fund budget to the capital projects fund as pay go.

So as the budget continues to increase, that number continues to increase.

That's what is reflected here.

The transfer to the city schools basically is for the building maintenance and the pupil transportation contract.

So the building maintenance contract is just increasing because of contractual increases in things of that nature.

Pupil transportation increase.

includes collective bargaining, two additional drivers, and it also converts nine 30 hour drivers to 40 hour drivers or 40 hour positions.

And then again, the transfer to debt service is another policy transfer that is just

the equivalent of the meals, 1% of the meals tax and so that's an additional $290,000 that will be going to the debt service fund.

And so all of those things together get us to our increased expenses of about of the $23 million dollars which matches the increase in spends of all of our new revenue.

Any questions before we move on?

Thank you, Chrissy.

Good evening, Council members.

I'm Chris Cullen in the City's Director of Finance.

Mr. Sanders asked me to provide you an update on these two financial items, which are not included in your budget, but obviously are significant.

The first one is the update on the American Rescue Plan funds the city received, also known as ARP or ARPA in some circles.

Just as a reminder, the city received two tranches of funds in June 2021 and June 2022, totaling $19.6 million.

City Council allocated those funds into two main categories.

One is called revenue replacement, which was $10 million.

And the other one, for lack of a better term, are ARPA projects.

The $10 million, for lack of a better term, is sort of the standard deduction the U.S.

Treasury allowed local governments to take to put it into that bucket.

And so that's the choice that was presented to Council and that they took

There are some slightly different spending requirements with each of those.

We can talk about those if you like.

But all of the ARP funds have been appropriated by council.

18 million has been allocated for 64 individual projects over the last number of years.

There's still about 1.6 million that are in unallocated accounts.

Most of that is on the ARPA side.

Appropriate means that we brought all the funds to you and you've approved them being spent.

But we also approved, part of that appropriation was to a contingency account and another one was to something we called unallocated.

So there aren't specific things that are tied to those.

So the money has been

legally appropriate.

However, it's not designated for a specific use like the other funds, which again, were spread out over 64 different projects.

So to do something with the 1.6 million, you would not be ending a project that you're planning to do.

And then to date, approximately 65% or $12.7 million has been spent.

$489,000 has been obligated to be spent and obligated means it's sitting on a purchase order or a contract, some sort of vehicle which obligates the city just to pay it.

And there's about $6.5 million, which, for lack of a better term, is calling the balance.

That's the difference between those two categories and the $19.6 million.

So those are, again, projects, money that are in projects.

Those projects are either underway,

have been completed or are somewhere in between.

I believe that's what?

Well actually if we jump to the next slide I think it looks a little more granular.

So this is again, just sort of slicing and dicing it slightly differently, just to give you some sense of where these projects stand.

So you see the project status there, we have completed projects, projects that are in our way.

Projects with questions is my shorthand for, I'm not sure what the status of those are.

Some may have been started, some may have been completed.

It's just some additional work that needs to be done.

and

and

traveled back over the last few years and our experience with COVID.

Two examples that I'll give you which contribute to that.

The city at one time had a requirement that you be vaccinated in order to work for the city or you had to go get tested.

So we allocated half a million dollars and employees went and got tested on a weekly basis.

We spent roughly half of that over the course of about a year on employee testing.

So when that requirement went away, there was money left over from that project.

Another one is we sent aside $20,000 for take home COVID tests for employees.

Again, though, that was at a time when COVID tests were not readily available as they are today.

So that project never got started.

Can I clarify?

So the completed project's balance is

kind of left over.

The unallocated balance is still available to spend on whatever we'd like.

Correct.

And so that's the number you see in gray below the errors.

Those two numbers add together.

So it's 1.6, but kind of really 1.2.

Right.

that's never been allocated to any sort of specific project.

Okay.

And I also would like to clarify one more thing.

You just said about COVID test being as readily available as they are now.

I would just like to say to anyone in this room and listening that tomorrow, March 8th is the last day you can order free COVID tests from the government.

So do that today.

The project that project and and

is ending tomorrow.

So that's the punchline.

So there are actually two dates

that we're keeping in mind.

One is December 31, 2024, when all our funds must be obligated, or they have to be returned to the U.S.

Treasury.

The other is December 31, 2026, which when we actually have to spend the money, we have to get the money out the door.

And to Mr. Payne's point, you know, tick, tick, tick, tick, tick, December 31 is coming up quickly.

And so when we say are obligated, Treasury defines

Order placed for a property and service and entry into contracts subawards similar transactions that require payment so in sort of city finance speak things like a purchase order or a contract something like that is what we need to where those funds need to be and also as I've said and Mr. Sanders have said we have no intention to send any money back to Washington and so he has tasked me to ascertain the obligation status of the projects with a balance

in order to formulate a recommendation to bring

One of the things that's also in the back of my mind, and I'm sure you've read this in some of the publications you've gotten from the National League of Cities, the US Mayor's Council, some of those organizations, is there have been attempts by folks in Washington on both sides of the aisle to claw back some of these unspent funds.

And so I think Mr. Sanders and I are of the same mind that we probably should spend each sooner rather than later.

And so again, he's tasked me with this job to ascertain his obligation status, statuses, statuses of these projects.

But I think what we're going to come back to you with is a plan to not only obligate but get those funds off the city's books and spent.

So that's where we go back, we go back just one slide.

The difference between these up at the top, the revenue replacement projects and the ARPA project, revenue replacement

This city has the most flexibility with, as I recall correctly, the U.S.

Treasury guidelines really said there are only four things you can't use it for, and they're things, frankly, we would never use them for.

So it's to be used for what they call general government services, and the interpretation of that is simply, if it's something that you would normally do with your money, you can do it.

So that allows us to have the most flexibility.

The ARPA projects fall under the U.S.

Treasury guidelines, which are very

and

So what I'll add to this is just to simply kind of reinforce the statement that was made.

So Chris and I have talked about how it's a priority for me, for us to basically audit these projects that are underway or with questions.

to determine one that the project can be completed within the time period that we don't feel as though there will be some issue with being able to meet this December 31st timeline, leaving the money in jeopardy of being recaptured.

And there also will probably be a layer of my willingness to reconsider some of the projects.

so I'm going to do that as well.

We'll take a look at what those projects are and if there is a comfort level that I might find myself with then I might cancel the project so that then the funds could be used in any ways that are in support of priorities that we have not fully been able to address and or things that come out over the course of this process where we know that the budget is tight as it is

and without any additional changes, then the answer would be we don't see how we fit it in.

But I guess we really just got a couple months to figure out like completed projects had a balance.

Yeah.

Many ways, you know, ARP is the amount of money that the federal government dispersed to local governments is something I've never seen and probably we will never see again.

If you think about $20 million, that's roughly 10% of our general fund.

That is an incredible amount of money.

And so we want to, you know, at the time, dealing with the public health, economic, social, financial issues associated with COVID,

But also looking for opportunities to, you know, go big.

This is a game-changing kind of money.

The money that was used to purchase the Avon Levy lot was from the revenue replacement bucket.

And that was money that we could tap into right away and affect that transaction.

You might find some things like that in the next few months, we'll see.

But again, we have no intention of returning these funds to D.C., so get them spent, get them obligated.

Next slide.

The other item Mr. Sanders just asked me to touch on was the year-end surplus appropriation from fiscal year 2023.

Hopefully this looks fairly familiar, as I think it was only about six weeks ago that you all passed this on second reading.

It was about $21.7 million in total.

Staff made a series of recommended

one time uses or funds to do things in the current fiscal year, which have now been built into next year's budget.

Some of these probably look familiar from Ms.

Hamill's previous presentation, some things that have been worked into the budget full time now.

Obviously last time this was before us we had a robust discussion about the contingency allocation.

Yeah, I would say that at this moment we would say that it probably would be some point after the budget has been passed because of course the intended use or the significant intended use that I have for it as the request that will come for you is in relation to the one-time cost for the adjustments with collective bargaining and copying class.

should the budget be adopted as is proposed right now, we would anticipate needing anywhere from 10 to 12 million of that 15 million for those one-time charges.

But the bottom line is

Right.

And if I'm not mistaken, I believe that's the last slide in our presentation.

Oh, yeah, just a reminder.

We get to spend every Thursday night together for the next month working on budget stuff.

The blue circles here are work sessions.

We do have two public hearings.

One is on the 18th that we talked about.

That is the public hearing on the tax rates.

The ads for that do have to be published no later than Monday.

And with the Daily Progress's publishing schedule, that's actually going to publish on Saturday.

Welcome, Mayor.

For your edification, we talked about earlier that the current ad is set to go in and advertise for three cents on the tax rate.

We can always come down, but you can't do anything more than you advertise.

If there's any appetite to do anything different, other than that three, we have to know tonight for that ad.

Correct.

and then also there will be three separate public hearings.

One will be on the real estate tax rate, one is on meals and one will be on lodging.

They will all be on the 18th.

The 21st is our community budget forum and that is also the night that we use that as the public hearing on the budget.

And then April 4th is the work session.

So just a couple of topics there to back that up.

Next week we'll be talking about agencies, non-profit and outside agencies.

The 21st is the community budget forum.

The 28th we'll be talking about the CEIP.

and then the work session on the fourth is typically wrap up all loose ends.

What else do we want to talk about meeting?

Some years we've not had to have that.

We'll see how that goes.

That's on the next agenda.

Just on the agenda.

March 18th, I'm sorry.

I'm already in next month.

Okay.

March 18th.

We meet for, in theory, it's supposed to be like a 10 minute meeting right before you go to plan and commission to vote the budget.

So that's all of our formal presentation.

We're happy to answer any questions, help with any discussion you all want to have, go back over any details you saw, anything you found.

This is the one work session that is really more of a general overview of the entire budget.

It's not so focused.

So I apologize for being late.

I had a lot of work things to do.

But I had a robust discussion yesterday with the with the downtown business association.

And we had two staff there, Matt and I forgot the new gentleman's name.

Yeah, so, but, and they had just a couple of concerns, well, questions.

One, you know, I think some of them wanted us to meet with them and I, you know, and I say, you know, one or two of us can do it, but we all couldn't do it just for them.

And they had opportunity listed all of the times where

anyone could come and speak, but they had questions about the surplus and things like that as well.

So, I mean, I was able to review the information.

I'll be able to share it with them.

It is public information, yeah.

And so, they just had, you know, their

You're going up on, you know, I think some questions we had as well.

It's like you're going up on the tax rate, but you had a big surplus.

And, you know, I was able to explain what we had done to that point.

And it's not ideal, you know, but it's hard to

Estimate the economy, particularly with the way the real estate was doing last year.

So I thought someone would be here tonight, but they may be in the future.

So, just generally speaking, some of the things that you're going to see as you look through the departmental budgets,

Number one, as Sam has spoken to you about, we've changed the way that we budget for vacant positions.

And so we used to budget vacant positions at the minimum.

I'm sorry, at the mid to many m's.

At the mid and we used to budget at the highest at the DB or the pension rate, which is the most expensive to be conservative.

And as we have continued to return large vacancy savings because we've had large number of vacancies, one of the things that we did with this budget was that we took every vacant position, budgeted them at the minimum.

And we're now using a blended rate.

And so that's cheaper.

So some of that accounts for some reductions that you see there.

However, that is also offset because we don't know what councils are going to vote or how you're going to vote in terms of colas.

and so those are typically every year budgeted as a lump sum like you saw on the slide previous and then in the next year that gets divvied up to the departments by the position it catches up and so there's a net effect there but in some departments you're going to see negatives simply because of the way we're handling the vacancies and that accounted for two and a half million dollars citywide I mean overall throughout the

the whole general fund.

So that may be part of that.

I also think that they move some things around between divisions there, which is making up some of that.

Are there questions?

So we're essentially at this point, leaving ourselves roughly a million dollars of that one penny on real estate tax.

Exactly.

Well, that's true.

But this budget is based off of two on real estate.

Right.

On real estate.

And is that

Why that number?

No, it was not it's not playing in our mind.

It was to allow you all some movement around.

If you were to make a change to the lodging tax or to the meals tax, you would have the ability to offset that with real estate tax because the lodging tax you already indicated no interest in going above the number that has been proposed.

and then the meals tax for the various concerns of who it hurts and impacts if you were to make an adjustment.

It would be a slightly limited adjustment that we would encourage you to consider in that regard, because if you cut it in half, that's a little over a million and a half dollars, and a real estate penny does not cover that.

So anything that goes downward in what we have based the budget on requires changes.

And in my mind,

And I would actually be in favor for the real estate tax rate advertising it at four cents above even three.

And my thinking on it is obviously what we advertise is just the flexibility we have in our own discussions.

Part of it may be, are there additional expenditures we want to entertain?

But more than that even in my mind, it's because I think we may have future discussion about

what is

as an economic fact that the meals tax is our most regressive tax.

I think it also has a larger marginal impact on some of those smaller businesses.

And real estate is not a great tax by any means, but it is the most progressive tax we have the option to use before you even factor in the fact that we have a real estate tax relief program.

So I think just from a pure policy standpoint, I think we would probably actually be better off to say

raised real estate by three or four, but not touch meals or whatever that mixed lands.

Yeah, I didn't think that it was an appetite on council, you know, to go really, really above two.

And so that's why, you know, I talked to

City Manager, I put it at three out of, you know, I know last year we did ten, didn't we?

Or maybe two years ago?

Two years ago, yeah.

And we knew that we weren't going to go that high.

We just kind of like, and it cost, it was real uncomfortable there for a few weeks, you know.

I mean, we didn't have any intentions, I would believe, of going ten.

There was also a lot more uncertainty at that point, at least for me, because I was brand new to council.

I feel more certainty about things now.

I have a hard time imagining that I would vote for more than three cents on real estate tax.

Two would be what I would prefer.

Mostly because, and I respect the points that Councillor Payne has made, but I feel like our community, we're making significant investments in our organization and I think that's really the biggest takeaway really from this budget.

We're going to have to continue to do that.

No, I'm comfortable with three.

Yeah, maybe we should just kind of go down just to make sure.

Comfortable is the wrong word.

I think I had suggested on an earlier occasion that three cents is something that could be doable on the real estate tax, but it would be seen as a trade-off against meals tax, not as a way to say, hey, we're going to get

$3 million more in real estate tax and $3 million more in meals tax and $1 million more in lodges.

I'm okay with advertising three.

I hope throughout this process we'll just keep in mind that economic reality is meals, any adjustment will be our most regressive option combined with the fact that

If we were to go with this, we're going to be about near the highest in the entire state for both lodging and meals.

The real estate tax rate itself doesn't matter in terms of comparison to other localities.

It matters in terms of... It matters as a multiplier on the assessment.

So it doesn't matter by itself.

Correct.

And the other component is, even with that factored in, it's our most progressive revenue option with the most robust real estate tax relief program in the state.

So I still think it's a relevant fact that

for lodging and meals, competitive industries.

We're going to be at or near the top in the state without much room to really adjust beyond that.

I agree that the meals tax and the lodging tax, because they're a percentage on what people spend, that is you're able to compare that by just looking at the rate with other localities.

I understand that, but I still think it's a relevant fact for us to keep in mind.

Yeah, and I realized when we went through this, we were trying to determine what this

Yeah, just because obviously this may, I think we just have to think long term.

On the long-term bigger picture front, just briefly, the best way we can bring down assessments to a more manageable rate of increase or stability is to increase housing supply.

So that is the long-term solution to making things more affordable.

Can't forget that.

Okay, so I'm going to go one more round and see if we have any more comments from counselors and then I'll open up to the public.

So I don't have other opportunities.

Yeah.

So we are now open up to the public.

If anyone would like to speak, you can go to the microphone and you have three minutes.

I think one of the other implications we just have to be clear with ourselves in the community as well is what we've agreed to advertise means it is impossible for us to meet the adopted schools budget and

With the present allocations from the state.

And you correctly pointed out to us that there are about six different balls in the air with the General Assembly and budget that could well make life a lot easier in terms of how we let the schools get to where they need to get to.

But in terms of what we can plan on, our real difficulty is the planning problem that we need to make our decision by the first or second week in April.

Realistically, if we look at Richmond's performance last year, they went until September before they gave us an answer.

And I agree with that.

Obviously that's going to be something we're going to get the most feedback on.

I appreciate that.

That's a really good reminder.

If we get some traction from the state on maybe funding for school buildings or whatever that would offset Walker, we're all just kind of speculating at this point.

But is there some possibility to do a budget amendment where some of that money comes over into the operating side?

It's reprogrammed midyear to help them?

I guess my point is.

It is, but.

Okay.

And the but is that, and it depends on which formulation ends up getting approved.

So there's not a definitive answer

So one of the things we're going to talk about on the CIP Work Session is, you know, we talked about this last year as well before any of the new projects that we've added this year is that we are looking at a million dollar plus increase

last year.

We were talking about a million dollar plus increase in debt service just to cover the things that are already in the five year plan.

Now, you'll notice in the budget this year, that's only $300,000 that and that did not include but Buford.

I'm sorry, Walker.

Um, so you same different Walker.

And so one of the things that is hard with the CIP this year is there is a lot of opportunity.

So since we talked about that last year, we have gotten the $17 million grant money from the state, which is being applied to Buford.

So that has brought that $90 million project down to, you know, $17 million less than that.

So there's that piece.

That's less bonds that we have to issue.

But we've added Walker at $30 million.

We've added the library at $10 million.

We've added West Haven at $15 million.

And so if the sales tax piece or whatever is happening with the school legislation comes in,

We've kind of already allocated that.

So I don't think, I think you're going to need it in your CIP either for debt service or to help because there's also 50 52 or 55 million dollars worth of school projects that are in the seat five year CIP plan.

So

We'll talk about all that.

There's a lot of balls in the air that will be hard to nail down and we'll do the best we can.

But even with the things that we're planning, you know, the debt service piece is going to pop back into the general fund and it's going to be something that we're going to have to address.

It's not really increasing this year because we got the grant and because some of these big things are in the out years.

So maybe I'm just not

I'm misunderstanding.

Oh, it absolutely would.

So you could either use it to pay for off, to walk her all together, or you could use it to help offset your debt service and pay, you know, yes, it will.

And you said there would be about $52 million worth of school projects in the CIP.

Was that including Walker?

It is.

Okay.

I wasn't sure if that was other.

No, no.

Yeah.

I guess just a few additional high level thoughts still, just because this is something we've gotten a request for and that the community will be paying attention, I would still like for us to be able to see that

number for adding those additional cat bus drivers.

I don't know which date, which work session that would be appropriate to see.

But I think we, even if we can't or don't add it, we in the community should see what the bare minimum for implementing cats optimization plan would cost.

It may be answered in the hops, in the CAF allocations we receive soon.

But there's obviously a lot of community, both community attention and internal momentum, I think, around land trusts.

And I'm curious to see what kind of comes from that.

And it doesn't need to be tonight.

Either tonight or at some point I'd be interested to have us walk through what the expected use of the parking enterprise fund is going to be for in detail and the relevant kind of dates for that.

And finally, I still think at about $1.5 million just from us going to the Visitors and Tourism Bureau

Correct.

Okay.

And then the use plan for the parking enterprise fund, I think those are doable.

As it relates to the CACVB, to me, that's a conversation among the five of you.

There's nothing that we can give you in regards to that because that is a formulaic relationship that we have multi-jurisdictionally.

That would be a change to that process.

Now if you if you need us to do that research, what was the 18 month window for?

I think that's a term in the M&M.

To change the relationship or undo it or to end it or whatever is the 18 month window.

Yeah, please don't misunderstand me.

I'm not at all suggesting that, you know, for anyone out there listening that we pull out of that.

Sure.

I would be interested in having a conversation.

I think Councilor Payne has brought this up a number of times.

I think it's a good point.

Maybe the money is worth every nickel.

But is that a topic that you would like to have as a part of a work session then so that you could hear from the CACVB and then

Go deeper.

I don't know if we need a whole separate work session like this, maybe a small presentation.

What do they do?

I'm assuming.

Yeah.

I mean, the money we, because I want I represent the council for that committee.

We actually had a, you know, meeting today and it's really clicking.

Well, we finally got up to staff.

So I mean, from what I'm hearing, you know, what we do

You know, the staff is really small.

If anything, they're looking for additional resources because we're trying to compete with places like Asheville and other places, and they have four and five types of size of the staff that we have here.

And the meeting today was to look at seeing how we can get some additional resources.

And I'm just pointing that out in regards to everything else is something that is a possible lever to adjust the current budget.

That one feels less like that.

That's why I'm saying it the way that I am.

And if that is a work session topic within the framework that we have three slots available within a work session, if a presentation can only take 30 minutes,

We can work that out.

I can arrange to have that come before you.

And if nationwide there's an increased investment in trains, we'll be getting more people from the northeast corridor.

That could be good just to see what is the strategy we have in drawing people here to spend their dollars here.

to everyone.

So I think it's worth trying to draw people here in that way.

Yeah, I think that seems like a practical next step.

And I would be curious if we could just be sent along to us what that MOU is.

Yeah, we do that.

And I guess

It may not be

How much of our tourism is driven by the fact that there are wineries and Monticello and all these areas

Is that what's driving tourism or is there a way to measure in terms of the Tourism Bureau putting out Facebook ads and Instagram ads?

How much tourism is that really driving for a $1.5 million annual investment?

Yeah, so I can just chime in some and definitely court me if they can come and give you more information.

But an example, right now, it's a kind of low because it's based on a little bit lag on the lodging and just like the schools, it's a little bit low.

But there is a direct correlation in where we advertise, you know, we do a lot of

Taurus and Leisure Things and Baltimore and Charlotte because it's a good day drive to come here and go back.

When they had some extra money from the COVID they were able to really do some robust

advertised in particular to the community of color and that's why how they were able to win a lot of those awards and I found out that one of our recent meetings is one of the reasons that this region got the wine region of the world is because of our efforts to reach out to the community of color, specifically because of that and they were able to do all those different things to reach out

because they had some extra funds and now they're gone.

So I just don't, of anything, they're really struggling by the fingernails.

I just, like you all, I just don't see this.

I'm not doing this because I'm a homer for them because I'm on the committee, but I really don't think it's, you know, I think this information is good, but I just don't want to create an extra meeting of this during, you know, already a lot of meetings as like maybe we can, you know, get something

some additional resources from it.

I don't think it's there.

And I don't mean to pick on them, but I think I'm open to kind of questioning and investigating everything, even if the end result is we don't make a change.

I think the community is fairly going to ask if you had this massive surplus well over $10 million.

You've already increased the tax rate the past several years on top of assessment increases.

Why is that happening again?

And if our expectation is that even after a revenue increase this year, in future years, it may happen again.

My standpoint is I think we should do our due diligence and question everything.

I think it was fair for us to dive into the jail as part of that.

Again, regardless if it doesn't change our ultimate decision and opinion,

I just want to say one point of clarification on that is the current MOU does actually cap the lodging tax at the 5%.

So the calculation is only based on the first 5%.

So increasing the lodging tax this time or anytime, anything that we're collecting over 5% is not part of that calculation.

And for this, because of that situation and just where it fits in with everything else, I'm even inclined to be more interested in just what's going on presentation less as a budget leverage.

I think we can frame it.

I'll work it out with her.

Yeah, it's interesting.

You'd want to know that, I would think.

Anything else on your mind?

Well, did we have no public comment, right?

No, no online.