December. >> Whoops. Sorry. 401. I'd like to uh call the December 18th meeting uh of the budget review commission to order. And we'll start off with roll call. >> Vice Chair Schwiker. Present. >> Commissioner Bado
>> here. >> Commissioner Carla >> here. >> Commissioner Latiri >> here. >> Commissioner Newman >> here. >> Commissioner Poland >> here. >> Commissioner Stevens >> here. >> So at this point we have public comment where citizens may address members of
the budget review commission during the public comment regarding non-aggendaized items and on the agenda items when the item is presented. Arizona law prohibits the commission from discussing or taking action on an item that is not on the
prepared agenda. Citizens may submit one request to speak, a public comment card per meeting, to city staff. Public testimony is limited to three minutes per speaker. Written public comment cards can be submitted to city staff at
any time for the agenda or non-aggenda items. cards submitted after the public comment has begun for the item will be provided to the commission at the conclusion of the public comment for that item. I don't think we have any comment cards, do we?
>> Okay. Um, first thing I'd like to do is do a new member introduction for our new uh commission member, Randy Pollen. Randy, you want to give us a just a be brief background? >> Sure. How brief do you want to be? One minute or 10 minutes? >> I've got it down to three minutes. three
minutes. I figured that's probably what it was going to be. Um, well, I have been in accounting and finance for about 46 years, which is probably older than some of the people in this room. Um, so I was a partner with Deote and Touch. I
did uh audits of banks and savings and loans in the late 80s when we had a collapse. I also did forensic audits of banks for the federal government. Uh I left uh Deote in the early 90s and set
up my own consulting business and did a lot of uh venture capital work over the years and uh new company setups and operations and management. Uh and then I got involved in politics and you probably you know that I was the
chairman of the Republican party for four years and I was also the treasur of the Republican National Committee at the same time. So, I have a a lot of broad experience in uh in finance and accounting. And so, I look forward to
working with you all here as we uh work through the budget and and I'm looking forward to learning quite a bit about the budget of Scottsdale. Thank you. >> Well, thank you, Randy, and we look forward to having you with us.
The next item on the agenda is the approval of the minutes of the December 8th special commission meeting. Does anybody have any comments on the minutes? Mark, >> I have no comments, so I'd move that they be accepted as written.
>> Do we have a second? Okay. Bob seconded. Any discussion? All those in favor, please signify by saying I. I >> I >> I >> I >> Good. Motion carries. >> So, now we're going into the financial conditions report. Um Sonia will will do
this. We uh we've allocated 30 minutes for this. So, I think she'll make her presentation. Uh any questions you have, hold them for the end of her presentation and then ask them. Sonia, >> thank you. Um before I begin, I'd like
to do a few things. First of all, I'd like to introduce a couple staff members in the audience that are here because they're the real experts and can help Scott and I answer any questions. We have Anna Hanthorne, our assistant city treasurer and assistant CFO, who is actually the real expert on the city's
general ledger and finances. So, she's here in the audience. And we also have Michael Guggginsburg, who is our sales tax guru. He's our sales tax uh supervisor. So, he's also here in the audience if you have any specific questions. Today I'll focus is on
revenues and I wanted also to um uh have walk through with you two handouts that we gave to you before I begin my presentation. One of the handouts is a very large 11 by 17 handout. I wanted to let you know what that is because we will be talking about items that are in
this uh handout. So this handout shows you all the city's major revenue sources split out by fund. As you know, government accounting is done by fund. It's very unlike uh for-profit accounting. So, we account for everything by fund. You'll see the general fund, airport fund,
transportation fund, tourism fund, and so on so forth. These these groups of fundings and all the different u revenue sources that are um accounted for in each of these funds. These this first page they are called governmental
activities. That's what we consider as our governmental funds. The next page we have a group of funds and also the major sources for those funds and we call those internal service funds. They are internal departments that serve
other departments. They are self-insurance healthc care fund, the fleet management and fleet replacement fund, the risk management fund which is our self-insured workers comp and liability and property insurance and our PC replacement fund and the revenue
sources associated with that. And then the last grouping of funds is our business type activities which we call enterprise funds. Those are our water sewer funds, our solid waste fund, aviation fund, and they also have capital projects funds. And so when we
go through the presentation, when Scott and I go through our presentations, you'll hear that we're talking about governmental funds, business type activities or business type funds, and that's what we're referring to. Okay. So moving to the presentation, we put
this presentation together to share with you some key financial metrics and trends. >> Can I ask a question? I know you said wait the just this one. It would have been a lot more helpful if we would have had a percent of of of total of the revenue but each one of these category
not in a context the major contributors are. So it's a piece of information that would really help me uh understand the sources of revenue not just description but as a percent of total.
>> Thank you Commissioner um Lati the uh percentages will be presented in um Scott's presentation. So he will his presentation will show the percentages. We also have the second handout for you which is the the detail reports that's
20 pages long and has all the uh detail revenues categorized by all the major revenue sources that you see in this summary. So, you will have the line item detail and um the actual dollar amounts and when we get to Scott's presentation,
which is item four on the agenda, he will have a pie chart showing percentages and he will go through that with you. Great. Thank you. Okay, so going back to this financial conditions uh presentation, we put this presentation together to share with you
some key financial metrics and trends that show whether the city is financially healthy and on financially sustainable trend. You should have received the full financial condition report. It's in your packet. The report contains a lot more information than I'm
able to cover today. So I encourage you guys all to read the report. as this presentation we don't show every single metric we just highlight the the main ones. Um okay so as you're aware government uh finance is very different
than for-profit finance and uh there are numerous studies and research uh over the years on how to assess government financial condition and sustainability. These studies are done by different authorities on government finance like
the ICMA, the GFOA, rating agencies and various government finance scholars. We look at these studies that are published um by these authorities to help us develop the metrics that we are about to share with you. Uh so we picked the five key metrics and ratios that are used to
assess the finan city's financial health and whether we're on a sustainable path. First of all is operating results and basically that's are our revenues covering our expenditures. Are we operating with a surplus or are we operating in a deficit? Are we dipping
into our reserves? We know that looking at so that is the first metric I'll show you. We call that structural balance. Basically our ongoing revenues need to cover our ongoing expenditures. And that's one of our key tenants of how we
put the budget together. making sure long-term not just one year but we look out five years our ongoing operate uh revenues cover our ongoing expenditures and we uh as you know looking at just revenues and expenses don't tell the
full picture of an organization's financial health we had to look at the balance sheet as well so next we look at our cash solveny and that is looking at do we have enough cash to pay our bills and also do we have enough cash reserves to respond respond to emergencies,
unexpected events, economic downturn, etc. We then also look at our long-term obligations. That is primarily the largest obligation that we have is our debt burden, the bonds that we issue, the debt that we have and also our pension liability. So basically are we
overburdened with debt? Do we have the capacity to issue debt in the future for capital needs? That is very important indicator of our financial health and our financial sustainability. Next, we also look at our capital reinvestment ratio and are we keeping up with the
infrastructure rep replacements as they age? And finally, net position. It's similar to net equity. Is the city increasing its net position? Meaning, do we own more than we owe or is there a decreasing trend? like as our
liabilities increasing more than our assets which is not good as it might signal problems ahead. Next slide. Okay. So just a couple quick things. All the data that we used for the financial
uh metrics are all obtained from our audited annual comprehensive financial reports. So we went back through years 2007 which is the beginning of the great recession through 2025 our latest audited financial report which is hot
off the press. It's actually not even u published in in on the website yet but it's audited. The auditors are done with the audit. So, we have the data and we've included it here for you to show our trends since the great recession. It really helps us understand our revenue
and expenditure trends and how um you know financially sustainable and healthy we are. We also compiled uh pure city averages. We looked at Mesa, Gilbert, Chandler, uh Glendale, Poria, and Tempe primarily picked based on their size and
location. Uh we're not looking at Tucson. We're not looking at something outside the Phoenix metro area. We're not also not looking at very small cities or very very large cities like Phoenix and they don't have their 2025 data available yet. So we were able to pull their 2024 data and also it's from
their audited financials and again our uh metrics are put together based on governmental activities which is the funds that I shared with you earlier on those slides and then business type activities because we look at those two
groupings of funds or um operations very differently because of their different funding sources and their focus. Okay, next slide. So the first set of metrics on our operating results, next slide. Um I really want to touch on this is what happened in the last five years because
as you will see in the uh chart, this will really help explain it. In the last five years with the start of the pandemic, there was an unprecedented increase in federal spending. We received the city received 60 million in
federal stimulus dollars and there was instead of with the lockdown instead of a decline and a fall off in sales tax revenues which is what we originally anticipate anticipated anticipated because shopping centers, shopping malls, restaurants were closed. We
anticipated a fall off and a drop in our sales tax revenues. Instead of that, there was actually a surge in consumer spending because everybody was buying everything online and they all got stimulus checks as well. So, we didn't
anticipate that, but we actually had an increase in revenues instead of a decrease in revenues. And then with the post-pandemic demand and the post-pandemic travel, Arizona was one of the first places to be open. So we experienced a huge surge in um tourists
and more consumer spending. The doubledigit inflation also raised prices and then you know resulting in increased sales tax revenues. There was also a housing market bubble in 2022 or somewhere around there which created a
lot of capital gains tax and that uh you know goes to the state but it trickles down to us as increased revenues as well. We also sold two pieces of land and generated about 70 million in land sale proceeds. So during that five-year
period, there was a huge uh surge in one-time revenues. Some of it may be a new base that we might have because of inflation, but a lot of this is one-time revenues like the stimulus money or the land sale money or the housing market
capital gains. Those are not ongoing revenues. At the same time, we had a initial slowdown in expenditures in that uh five-year period. The f initial pandemic lockdown. We we probably didn't even hire hardly any of our seasonal
workers. So, you'll see in 2021 we had a dip in our expenditures because we had a reduction in expenditures. Everything came to a screeching halt. We didn't have we didn't move forward with construction. um some of our you know uh there was a lot of delay in spending because of all the supply chain issues
and then we also then subsequently had significant vacancy savings with retirement attrition and the tight labor market where we weren't able to fill the positions. So with that what you'll see is a gap a revenue expenditure gap and a buildup of
cash. Next slide. So here we go. So going back to 2007 which is on the far left uh hand side of the chart you see that we were operating at a deficit with the great recession and we were able to operate the the blue line being the
expenditures the uh I'm sorry the orange line being the expenditures and the blue line being the revenues. You can see that with the great recession we lost significant amounts of sales tax tax revenues. So we immediately was we were immediately in an operating deficit
position and so we fortunately had significant buildup of reserves that we could rely on and the city strategically planned on using those reserves down to a minimum required level. So you'll see that happening from for quite a few
years. And um and by the way this is our governmental activities. So this includes not just the general fund but all our restricted revenue funds as well. So we were spending down some of our restricted revenues as well. Not just the general fund because a
significant amount of restricted revenues. Then as you can see starting in um 2018 we started to climb out of that deficit position. we balanced our books and then in 2020 was when that pandemic happened and when that split happened which which is what I explained
which is surge in revenues and we haven't seen the huge surge in expenditures yet because some of the expenditure increases like the personnel wage and cost inflation the uh police and uh fire facility or personnel and
wage increases those haven't quite shown up yet uh but they will show up in 2026 and beyond. So um so basically there with that what we what the important thing for us from a budgetary standpoint
is our expenditures will show an increase because of the inflation pressures that we have and we will probably see a slowdown and a flattening of revenues and we just need to make sure that we can th those two lines don't cross right and we just need to
make sure that on a long-term basis we maintain that structural balance. we don't go back to a deficit balance and we make sure that we have those reserves for the next economic downturn that might uh will will eventually come around. So that's the focus that we have
right now from a city standpoint. Next slide. Um we have been very prudent in using those surplus funds. We've built up a lot of reserves. Now keep in mind it's not just in the general fund. There's quite a lot of reserves built up in the
uh construction funds in the uh preservation funds of some of the restricted funds. Um we have been able to cash fund various capital projects. Uh we've been able to pay down our police pension liability, unfunded
liability. We've been able to increase our general fund reserves to a healthier level and we've been able to fund the ambulance service startup. So, we've been um been really focusing on using those surplus funds for one-time needs
and not using those surplus funds for ongoing expenditures. And we will continue to be prudent in using those surplus funds. Um our challenge to put the budget when we are putting the budget together is as I said maintaining that structural balance um when
operating expenditures are increasing and as I talked about wage and cost inflation pressures um street overlay needs and whatever else we do have u uh a lot of times more needs than we have expenditures to fund. So we just have to be very uh mindful and prudent in making
sure we are um strategic and plan well and you know and uh focus on that structural balance. Next slide. So now we're moving on to business type activities. This is our water, sewer, solid waste and aviation funds. As you
can see for those funds, we pretty much operate from a um cost recovery standpoint. And so there's really not a huge surplus. They're not impacted by sales tax revenues because the they're not funded by sales tax revenues. If you go to your cheat sheet here, they're
primarily funded by uh rates and fees and charges. And so you can see that they they are pretty much um uh the expend revenues and expenditures pretty much are aligned. Any excess revenues are used for capital and or pay down of
debt principle. and that little split at the very end in 2024 and 2025, we did raise our rates um in 24 and 25 in anticipation for uh the infrastructure needs that we will have and new debt issuances that we are anticipating. And
that little dip in 2025, that's because we had a change in estimate for one of our joint ventures. And with that change in estimate, there was an accounting entry that reduced the expenditures by 15 million. It is a one-time thing. It is not a budget thing and it's not a
cash flow thing. It is an accounting estimate that we that we changed. So that was what that was and so really in 2026 that will go back up. Um okay. So that uh concludes the
operating um um results. Let's move on to the cash our liquidity and our cash solveny. Liquidity is a really important um indicator of financial health. If our trend, this is our cash, our available
cash is it it basically tells us are we able to pay our bills. Do we have enough cash to uh respond to unexpected emergencies, economic downturns as we saw in 2007 how much we relied on our um
reserves to carry us through those uh years of economic downturn and revenue um losses. So our so this is unlike a for-profit sometimes forprofits look at liquidity uh basically cash and investments divided by uh current
liabilities is a 1:1 ratio is is sufficient for a business but it is not sufficient in government because we're we h we're having to reserve money for a rainy day and our rainy days could be you know very sizable depending on what the natural disaster emergency that we
have to and the economic uh downturn that we have to um uh attend to. And then every time we have an economic downturn, when revenues drop because the services and the expenditures we have are people and core services, we can't just slash everything overnight like
some businesses can stop producing um you know production or shut down something. We can't really do that. We have to continue services and find a way to realign revenue and expenditures over time. So we do rely on those reserves to
give us that time to realign in a economic downturn. So wanted to talk about in 2025 that spike. So the orange line is our business type activities. That's our water, sewer, solid waste and aviation. The reason for that spike is because we
issued water and sewer debt at the end of 2025 and we haven't spent anything down yet. So this uh cash and investment includes our restricted cash and investments. It includes all the restricted cash as well. And likewise with the 2025 on the uh governmental
activities, it went up to 4.4 because we also issued the next trunch of our bond 2019 debt at the end of um 2025. So that spiked the um cash and investments up. Okay. Uh next slide. So the
considerations that we have for our cash reserves and liquidity as we put the budget together is having enough and adequate cash and liquidity and I as I mentioned unexpected emergencies and disasters, economic downturns, but we also are self-insured. We're
self-insured for workers comp. We we do carry, you know, insurance above uh the self-insurance limit, but we are self-insured for health and dental. We are self-insured for workers comp and liability. So we do have to have adequate reserves for those self-
insurance programs. We do have to have adequate reserves for capital asset replacements as they come due. So because of the large capital uh assets that we have, roads, sewer, water, uh we have to plan for that and make sure we
have enough cash. We can't just raise all the cash we need for next year in one year. So, it's it's something that we have to continue to plan for and and strategize for. We also have to maintain our AAA bond rating. We're very proud of our AAA bond rating because it allows us
to um issue debt at lower cost and debt is a really expensive um it increases the cost of our infrastructure. So, anything that can help us reduce the interest cost and reduce our financing cost helps us reduce the overall cost of
our infrastructure. No different than your credit score getting a mortgage basically. Okay, next slide. So, now that we've looked at our cash position, the next thing is our debt position. Are we oversaddled with debt? How does that look like? Again, from a financial sustainability
standpoint, we don't want to see this trend line increasing where it uh you know, it it basically handcuffs us to paying debt. So, as you can see, we look at this um debt principle and interest
payment plus our required pension contributions. This doesn't include our one-time extra contributions. This is just our required contributions that's calculated by our actuaries. So our debt principle and interest plus our required
contribution as a percent of revenues. Basically what we're looking at is the higher the percent, the less is available for operations and the more is tied up in debt. And so if this trend is increasing, it's it it it could, you
know, signal challenges downstream, especially if that's an economic downturn and we lose revenues. Then now all of a sudden this percent becomes higher and higher. The reason this percent has gone down is number one, we've been able to fund capital projects
with cash over the last five years. Instead of issuing more debt, we've also had a lot more revenues. So the percent because the you know denominator is higher the percent is lower and we've also been paying down our debt. Um in
the previous from 2007 to 2014 we were still issuing the preserved debt. So we we were still issuing quite a bit of the preserved debt. So that's why that percent was climbing and now we've been paying down that preserved debt and then we haven't issued any new debt and and
we've had a lot of revenue increase. So that percent is down. S&P tracks all the rating agencies track this percent closely as part of a an indicator of our financial health. As you can see, I put that on the side. We are not scored high
for this. They consider a scoring for this ratio to be 8% or less. So we are scored between a um double A minus and an A+ based based on our percent. Um we do have some uh additional debt that we
will be issuing on the governmental funds which is really our bond 2019 debt and but that will be funded by property taxes. And so we're not concerned with this. Our pure cities average is about 15%. I think our target is if we stay
within 14 to 20% we're still uh feeling financially um strong and sustainable. Basically, it's not hamstringing our operations. Okay, next slide. I'm going to have to speed up real quickly because I think we're um Next one is on the um
um business uh type activities. We do not have significant debt in aviation. I think there's a very minimal amount of debt in our airport fund and we don't really have any debt aside from a inner fund loan on the solid waist side. So primarily the debt on our enterprise
funds is water sewer debt because of the large infrastructure that we carry there. And so again we look at debt coverage and that is the net operating revenues operating revenues minus the expenditures what we have left over for capital assets and uh debt service. We
look at that excluding depreciation as a percent of our debt principle and interest. And obviously the higher the better that we want to make sure we are able to cover at least two times our debt expense. Our revenues net covers at least two times our debt and that's our
policy and we have been more or less around that policy. It's spiked again because um we paid off some debt. We issued the new debt and the new debt service hasn't started yet. So once the new debt service starts and we issue the
additional debt in next year and the next few years for the capital that we have that 4.55 will come down. Also the 4.55 is because of that 15.4 million gap entry that we did that lowered the sewer
expense by 15 million. So we ignore that 15 million gap expense. It's actually 3 point something%. So if that makes any sense at all. That was a gap entry. And so that 3 point something percent coverage is expected to go back down
below 3% but not below 2% as we issue more debt and we as we start paying on that 2025 debt. All good. Okay. Next slide. And then the next slide is the pension funded status. We are um dedicated to um ensuring that our
pension pensions are healthy. As you have heard uh in the past, when uh state and local governments do not pay attention to pensions, it becomes a problem for them down the road. And back in 2015 was when the um Gazsby the
government um accounting standards mandated that that governments start recognizing pensions as a liability because it was becoming such a big problem. And so you can see that in um the orange line, the top line is our
Scottsdale Fire funded status for their PSPRS, which is the public safety personnel retirement system. It was funded actually overfunded in those previous years, but deceptively so. That was because PSPSRS had um
had a lot of problems. They they had outdated actuarial um tables. they had outdated actuarial assumptions and other problems that artificially inflated the funded status. So when they went through and did their reform and fixed all their
um the problems and the provisions with their plan, fixed the actuarial calculations, that's what caused the fall in the funded status and that's what caused the significant unfunded liability that had to be recorded. So in
2015 the city recognized over 200 million 20 I don't remember 50 or 70 million in unfunded liability which then grew to 400 and something million by 20 I can't remember 2022 or something like
that and that was when we started paying down that pension unfunded liability because it was getting out of hand. So that's when you see um the blue line at the bottom is the police. So the police, same thing happened with police and
fire, same PSPRS plan that fell down to a 52% in 2015. And so in 2022, we started paying that extra pension liability. And as you are aware, um last year we uh
council authorized and you know with with the commission's blessings, we brought forward to council 50 million and that is not reflected in this yet because that is something we're doing this fiscal year. So it will show up in the next actuarial report. We're paying
that 50 million on a quarterly basis. So, as of today, we've made two quarter payments. So, we've paid half of that and we will pay the other half in the next two quarters. >> Just a clarification. Yes. >> What would that what would those percentages be with that in and since you're putting it in this year?
>> Yes. Thank you for that uh question. So, we did receive the latest actuarial report from for 2025 and with a 50 million contribution that um let me look that up. They provide the projections for us. So
the actuaries actually provide that projections for us with the 50 million that 72% is expected. All else held equal all else held equal is projected to go to 83.6%. >> Yeah. The point is is it puts a dent in
the in the numbers. It does. >> Yeah. It brings us up to where we would like to be. So um again rating agencies also pay very close attention to this. Um S&P for instance considers uh an 80 to 90% as above average. So that's kind
of our target right now. And we will also pay attention to the fire as well because we don't want that to drop below 80%. So we will maybe con we will probably consider some you know additional contributions through the budget process and make sure that those
are maintained at the 80 90% level. Okay. Um next slide. So this is I'm almost done. Um capital asset reinvestment. So this is another ratio that our rating agencies look at and another also another ratio
that these authoritative guidances um have us focusing on is our capital asset reinvestment. Partly because cities and governments uh we invest citizens tax dollars in significant infrastructure uh
roads and facilities public safety facilities and you know water and sewer infrastructure. So our capital asset reinvestment is protecting those investments, reinvesting in them and making sure that we uh are not um you
know um we're maintaining those assets. It's very very important. um according to Moody's so this ratio what this ratio shows is it looks at the accumulated depreciation as a percent of the original cost of the asset and the idea
is that you should be at least um reinvesting as much as your accumulated depreciation and if you're not then your percent is going to creep up and um according to Moody's a ratio of 65% or
more may indicate may indicate that we are lagging behind in our reinvestment uh lagging behind behind depreciation and it may signal that we need to issue debt to do some capital assets and so you can
see that uh for the business type activities again it's primarily water and sewer we're nowhere near 65% but that trend is increasing so that signals to us that we do have to pay attention into water, sewer, aging infrastructure. And then on the governmental side, we
are creeping up and that's you know the uh public safety uh public facilities, streets and any other um parks uh infrastructure that we have. So how have we addressed that through the budget? Next slide. This is my last slide. Um
this is how we've been addressing our aging infrastructure and investment in aging infrastructure. So for public safety facilities, we do rely on the general fund and any voter approved bonds. So we did have bond 2019 addressing our aging um uh police and
fire training facilities and some of our aging uh fire and police um uh facilities and parks and wreck. We do we have we did get voter approval for that 0.15 park and preserve sales tax and
that will assist us in funding asset replacements for those park and recreation facilities. Bond 2019 also provided some funding like the irrigation uh for Vista Del Camino and Cactus Pole and there were some facilities in bond 2019 and we do rely
on the general fund as well. transportation. We have the 2% sales tax that we use for street overlay and we also have the.1% um arterial life cycle transportation sales tax for that and then general fund and water and sewer infrastructure is
100% funded by water sewer fees and other public infrastructure. Same thing the bond 2019 addresses some of those and uh general fund and if there's any other funding sources that we we might have. That is my last slide. I can take any questions if you have it.
>> I'm going to withdraw all my questions in the interest of time and make three observations. Uh, one of the things I'd like you all to know is this is the report that she's referring to that the slides came from. From what everything I can tell, what I understand, this report was not gamed. It was a self assessment
that was done by the staff using metrics that are generally believed to be appropriate metrics for state and local governments. and uh and the tables that are in here in the descriptions are a pretty good self assessment overall. Uh I think it makes the city look pretty
darn good. Uh the second observation I was going to make is the slide 17 on accumulated appreciation. Another way to look at that uh 10, you know, 20 years ago assets were 40% depreciated. Now they're 60. So if you assumed assets last for 10 years, 20 years ago our
assets were only four years old. Now they're six years old. So it kind of is a mega picture that we could have some potential problems with an aging infrastructure, but that's super high level. So you'd have to get into the details to really know anything there. And then the final thing I want to
mention, I will want us to kind of look at the police pension thing again to see if there's a financial opportunity to do some extra funding once we have our head around the reserves and where we stand. This will be a spring discussion. And the only other thing that came out of the police thing for me is uh I'm pretty
sure I I believe we want to be in the top three as the way we compensate our our police uh uh ser people policemen. And I believe there are more than three cities that believe they should be in the top three. And that sure sounds like
a a recipe for potential disaster. So it's probably not our job to look into that. I guess as a budget review commission, we'll see what that's going to do to salaries and maybe we separately ought to just talk to our uh well, I guess if city manager, I don't need a comment from you now. It's just
an observation to something that scares me. Maybe at some point that's worth addressing whether that's the right way to be looking at things for a city. And that's all. >> Thank you, Mark. Good observation, Brad. >> Yeah, thank thank you. to uh city treasurer Andrews a very very good
report is actually captures the spirit of what I was asking about two meetings ago I couldn't be at the last meeting but I think it does a nice job of capturing the spirit of what I was talking about and and I like a lot of the metrics in here one metric I was thinking about here in terms of your ongoing revenues versus ongoing expenses
you know I talked about a leverage balance sheet and you know where revenues are always staying ahead of our our our known expenses and so if we come up with a metric that kind of maybe that's 1.05x 05x of, you know, if the revenues versus expenses that we know are ongoing just to run the city. It
seems like that would be that would capture kind of where we are on a quarterly basis. When we get to the quarterly report, that would capture are we how are we doing tracking on revenues versus expenses on a ongoing basis. I think that becomes part of a KPI package there. Um but I think it captures it it
points in the direction of kind of what we we didn't have all this information last year but we we were able to get some of the priorities like maintaining the maintenance was more important than new capital because we also we also know that we've got a lot of capital projects but only a certain amount of bandwidth.
So you said more debt would change that one metric. I'm not sure more debt's going to help that if you don't have the bandwidth to get the project done. So, city manager Kaitton may have have some comments on that and I know he's been working on that, but it seems to me like it's more bandwidth to get those projects done there in terms of of of uh
capital renewal u would be important there and I would say it's also prioritization of projects because there are certain critical projects I I went through the whole budget and I gave it I gave it to each of you last year and all of our bandwidth was eaten up by just critical projects let alone preserves
and all the other things that could wait. I'm not saying I'm not Don't panic Carla. I'm not going to sit there waiting, but I'm just saying because those are dedicated funds, but there's a certain amount. You can't do all of that right now at the expense of critical projects, especially if you're going to get start getting traction on renewal of roads and renewal of water and things
that the really large capital projects. So, I would just say that really ought to be come through clear in our budgeting this year in terms of priority. And then I'm glad to see the pension kind of gets solved by what was done. I didn't realize the leverage that with $50 million would do. But if we can if we even have room to push that
further, as Mark said, I think that would that would um kind of solve that problem. The police and fire are happy and so when I have a problem, then they show up because they're happy with us, you know, all of that. And then uh um the last item was um I think that covers that covers all my comments on that. So
I think it's very good. I I it was very informative, very helpful. >> Thank you, Brad. Skyler, >> you guys hear me? Okay, >> you guys can hear me? >> Yes, we can. >> Great. Yeah. No, I I would echo what everybody said. Thank you so much. And
and my main takeaway is really, you know, cities financially strong today and and u that was a great report. really makes clear that um you know I think discipline maybe not expansion is what what's going to protect the strength of this of the city budget and especially I think um what was laid out
when as revenues normalize and costs rise my question is more clarifying um and as it relates to um the operating results has the city looked at how much of the recent operating surplus is going to rem would remain if we excluded um
those things like the federal stimulus and the land sales and the interest earnings. >> Um, Commissioner Bnau, do you mean um removing those from the last five years and see if we were operating in a surplus position?
>> That's right. >> Yeah. So without doing it doing the math in my head I would say yes because sales tax was a significant factor in that in that revenues in those re sales tax increase was a significant factor and also state shared revenues was a
significant factor in those increased revenues. So even if we stripped out the one-time um federal stimulus and the land sales we would still be in a surplus position. >> We're still Yeah, we're still green there. Thank you. >> Let me just add one more thing. Can you
why don't you share with everyone your position on how you use one-time revenue sources because I'm pretty sure you don't ever use one-time revenue sources for ongoing expenditures. >> So the way we uh we look at one-time
revenue sources is what what we accumulated in fund balance last year and then we tr uh when we look at our fiveyear I don't know if I'm answering your question so help me out here. We look at our five-year and we make sure when we put our budget together, our
revenue projections and our expenditure projections do not result in an um uh deficit and that the one-time expenditures that we're using is the excess that we accumulated from prior years. So, we're we're drawing down fund
balance for one-time needs, not for ongoing. Is is did I answer that question? If I may just add, >> we would never use one time to uh revenue to support ongoing expenses. >> Brad, I have one other one other comment
regarding revenues. You know, we had a lot of discussion um in honor of David Smith about the food tax last year and of course the state I believe has a law now in in and various municipalities are implementing that in in calculating revenues for this budget cycle. Should
we just assume that the food tax goes away? Even though the council still has to decide that, but should we just assume that in our budgeting because it's seems like it's inevitable that that's going to happen and if I understand the numbers, it's somewhere around $15 million a year. So, it's digestible. It feels like it's digestible in the numbers here. But if
I'm wrong on that, correct, please correct me. >> City attorney, I believe you have a comment. >> Yeah, I I do. I don't think the food tax is ever going to go away. reason is that there are many small communities in Arizona that 90% of their revenue is from the food tax. Um I think what the
legislature did is they require um a vote of the pe the local um voters to increase the food tax or or or what have you. Now this our city council could obviously get rid of of it if they choose, but I think it's un very very
unlikely at the state level it's actually go away. >> Well, thank you. Thank you. Is it is it fair though that it if I look at the metrics and the numbers it feels like there's room in that is that guidance that we could think about I I mean if there's a if there's a place where we
could appropriately tax it seems like that would be a place in that and obviously it has a lot of other machinery has to go into motion to make that happen but from a budgeting standpoint it seems like we've done a good enough job to be able to manage that. That's just a question. I And if that's if I'm off on that, please please
correct me. >> So, help me understand what you mean by appropriately tax like from a budget standpoint like >> Well, if we if there's a thought out there that that certain taxes, I'm I'm thinking talking
with Commissioner Smith when he was on the commission in terms of that being a regressive tax. Okay. is is it if there's room in our budgeting the way we've done that is that are there anytime we can take taxes away I think we should try and look at that you know um and there are other places that we
should look at that if that's possible but I'm not going to get into a big food fight over food fight over over taxes right now but but I mean we should look at that if we if we if we're bringing in enough revenues to cover what we need and we're in good financial health which
you've done a great job of why do we want to tax more or continue to I I think you will see that in the budget specifically like for example last year uh the example would be in the preserve the the the 2004
1.15 preserve tax. We do uh propose uh paying off the remaining debt and um potentially sunsetting that debt early. So we did propose that in the budget. So if we do project out that we don't need
certain revenues and fees, I think that the city in a responsible manner would suggest that. But um given our uh expenditure projections and what we know about expenditures, we don't see that opportunity right now. >> Okay, I understand that and I understand
there's other debt that we could we could pay down. Maybe that's the focus is between now and pick a pick a year 2030. Our goal is to get those things taken care of and then you can start to think about that. That's fine. I I just to me I'm thinking strategically in terms of where we're headed with this rather than just thinking up new things
to do. What are the core things we need to do? Has that all paid off? Have we funded it? Is the debt down? You know, and and try to pay as we go as much as possible. And then after that you say, do we really need all that tax? >> That is correct. So I I believe to help uh kind of put more perspective in this,
we still believe that we have a a little bit of a bubble that will kind of correct and come down. So we do believe that our revenues might flatten out as our expenditures catch up. So uh we don't we don't feel that moving forward is going to be this big gap.
>> Mr. Sure, if I may, >> I just add to this discussion and uh it's a comp it deserves a complex answer to your question, but and so at the risk of oversimplifying, I might submit that in a number of areas in critical
infrastructure, we have been deficient in our discipline in funding those. And so one example is in our roads. And so I appreciate the question and the the short answer would be yes, but we're we're not I don't believe we're in that
financial situation. I believe we have deferred um some critical infrastructure needs for maintaining um significant roads and that will take at least 5 years of significant investment to get us back what I would believe would be an
acceptable community standard. So that's just one example where I believe there might have been some support for projects for nice to haves, what some people would consider nice to haves and we have potentially deferred uh the need to have the needs. Um and now we are in
that situation in utilizing the roads as an example. If you don't have the discipline to fund it at the level that you should, which is the situation that we're in, it takes additional funding to actually get us back to the level. So, more detail on that in the future, but I
appreciate the question and uh and then also I might just quickly submit that we're seeing significant uh wage growth as referenced by uh the conver kind of the comment about the public safety. it was police was referenced but it's uh the resolution for the third uh in the
three area is uh first responders for fire and police so about 800 sworn uh that have had significant uh wage uh pressures uh upwards and so on an operating expenditure count or operating
side that's something we sign will be grappling with >> yeah no I I appreciate the perspect it helps put my thinking in perspective because there there I agree completely completely with let's get all those priorities done before you start thinking about rearranging the revenue stream uh in any way on that. But at
some point in the future, it's it's a nice lofty goal to have at some point here. But, you know, we don't we don't know what next year with the economy and everything's going to hold either. So, um >> yeah, I agree with you on that. We don't know what the legislaturator is going to take away next. Um Carla, and I think
that'll be our last comment on this one and then we'll move on to the next segment. >> Okay. Thank you. First off, I want to thank staff for an excellent report that makes everything really easy to understand, as much as it can be. Um, while I understand what Brad's talking
about, I don't think we give up any revenue stream because what really jumped out at me from all of this is pretty much what Greg said about the aging infrastructure. That that's deficit. I mean, we have an issue there.
And then also if we can pay more on PSPs. Um and then just final quick comment on um the preserve. There are un unfinanced preserve commitments that we made to the voters and as that comes
forward. I know that staff will look at where we are on a regular basis, but I would not um count on sunsetting the tax anytime soon. Thank you. Thank you, Carla. Okay, if there's no more questions, I
think we'll go on to the next uh segment, the historical revenue trends with Scott Selin, our budget director. Good evening. Uh we're going to take a look at historical trends of our major tax revenues, uh tax revenue sources.
The presentation we're going to look at focuses on the major taxes, but you do also have all the fees and charges down to line item detail in one of the packets in front of you. And once we get through this, we can take a look at some of the fees and charges in that handout.
Time allowing. Can we go to the next slide? These are the individual items we'll take a look at today. We'll take a look at sales tax. I would mention as Sonia did that we do have our resident sales tax expert here that could provide some additional insight if there are technical questions. We'll take a look
at state shared revenues, primary property tax, and transient occupancy tax or the bed tax. Next slide. This pie chart shows our operating revenues for the FY226 budget year. This presentation that I'm
doing right now focuses mainly on the dark blue, orange, and green wedges of the pie. The sales tax, state shared revenue, and property taxes. Although, like I mentioned, we can get to fees and charges at the end. This encompasses all city funds for a total of just over $1.1
billion. Next slide. Uh, next. Yeah, thank you. So, talking about sales tax, we showed we've showed versions of this chart in the past. Uh we do it to reinforce that of the total sales tax that you pay in Scottsdale in
a given transaction, only 1.7% of that sales tax uh is due to Scottsdale's local sales tax. Uh the majority of sales tax goes to the state and the county also charges uh some sales tax as well. Our overall sales tax rate of 1.7%
is made up of six components that are listed on the right hand side of the slide here. The largest component is our 1% general fund sales tax which does not have an expiration date. And the rest of the sales tax components are restricted
for specific use as listed. For example, the 0.1% public safety uh sales tax which also does not have an expiration date and the 2% transportation also no expiration date is that goes into our transportation fund and is restricted
for use on roads and streets. And then the final three components with their expiration dates listed. Um, our future sales tax slides are going to focus on the 1% general fund, but it is important to remember that each of these smaller components of our
overall sales tax rate will follow similar trends. Can we go to the next slide? This chart shows the adopted budget for the 1% general fund sales tax in red, that's the red line,
and compares it to the actuals for that particular fiscal year in yellow. Going back to fiscal year 2010 in this case for the 1% sales tax or back to the great recession era, some of you may have seen this chart before or a version of it. Um, we start in fiscal year 2010
at about $83 million a year. And looking at the actuals line, the yellow line, pretty consistent growth throughout the 2010s uh with a little deviation here and there uh until we get to the pandemic era. During that era, the revenues increased significantly when
compared to our budget. You see kind of the deviation between the red and the yellow. As Sonia alluded to earlier, we kind of projected that sales tax might dip after we saw the pandemic start to take hold and then in actuality the revenues kind of skyrocketed. I don't
think many people anticipated the amount of online shopping that would occur um as a re during the pandemic and as Sonia mentioned this was also fueled by the federal stimulus that was provided. It shows the difficulty of projecting. The actuals show a bubble when compared to
the budget. And we've been anticipating a correction for several years now. I'm sorry. We've been anticipating a correction. Uh could we go forward? I'm sorry, maybe one more. So, we've added the year-over-year
growth uh in the actuals on the yellow line. Uh we started with kind of the biggest year of pandemic growth where the actuals increased year-over-year 11% and then 21% and then another almost 10% after that and we started to see uh a
little bit of a pullback. Um it was slower growth in 2025 when compared to the recent history and general historical trend. And then our FY26 projection reflected an overall decrease mostly due to the state's elimination of the residential rental
tax. And then in the outy years beyond the dotted white line in the adopted budget, we're projecting a gradual return to more average growth in the outy years. Uh 3% and then that increases to 3.5 and then to four.
Uh could you go forward one? So, in the white box that just appeared, you see that the year-to-ate trend, the current fiscal year through October is that the 1% general fund is $4 million and 8% higher than budget. That's the current state of the 1% sales
tax through October. And we should have November numbers uh ready here fairly soon. Can we go to the next slide? Um yeah, one more click forward. Thank you. So, this slide stacks Scottsdale's
year-over-year percentage growth of the 1% sales tax with Arizona's. Uh, Scottsdale is in yellow and Arizona's is in the dotted grayish line. Uh, we the purpose of this slide is to show that we've historically tracked fairly
closely to the overall Arizona trend when it comes to year-over-year change, but um, you'd see that our our valleys are maybe a little bit higher and our lows are just a little bit lower. we kind of have deviated a little bit more on the extremes than the state has.
Uh just to pick an example, if you look at FY209, our percentage change is at the bottom underneath Arizona's during the depths of the Great Recession. And then fiscal year 2022, you kind of see the opposite where we were at 21% year-over-year and the state was
slightly lower at 16%. I'd point out we did see a fairly significant decrease in fiscal year 2024. um a decline of about 3.3%. And a reason for that is that we had hosted the Super Bowl the previous year.
Um so a lot of that spending that happened in the previous year was not happening in 2024. And uh the 2026 decrease that we're showing is due to the elimination of the residential rental tax. As I mentioned earlier, uh the state does not charge a
residential rental tax. So you won't see that decrease in the state's line. You'll just see it in our line in yellow. Um, can we go to the next slide? And when it comes to building our projections for revenue, um, we look closely at the recent data. This slide
takes our 1% monthly sales tax and takes a 12 month rolling average a month by month starting with October of 2023 and going up to October of 2025 uh, couple months ago. So, apart from a few minor blips, the
annual growth over this period is about 2.5%. There's a little bit of growth, but not that much. The annualized is 2.5%. We're going to continue monitoring the returns over the next few months to refine the general revenue picture and get our projections in line. Could we go
to the next one? Uh, yeah. And that states that our average annualized increase is 2.5%. Next slide. But when we project, we don't just look at the big picture. We look we get down
to the individual category level. We have individual categories of sales tax that we track. And this chart shows the 12-month rolling average of each of the individual categories that change um from October 23 to October of 2025.
So just to take a second to go over this. So some of the categories show fairly significant growth. Like we look at our automotive category, which is the first of the red bars, showed an increase of about 100,000. Construction, which is the next one, an increase of about 200,000 over this
2-year period. Miscellaneous retail and other taxable also showed increases of about 200,000 in their 12-month rolling average. We've got several categories that are pretty much showing no growth. uh our food stores, hotel, motel, major
department stores and our restaurants and then rental again is showing a fairly significant decline which we have been expecting. Can we go to the next slide? So just some risks that come that that could affect our sales tax collections.
Uh the impact of tariffs on prices and consumer spending that's um it's kind of an unknown how exactly that's all going to shake out. Uh, Commissioner Newman, I believe, mentioned legislative risks. There's possibility that the legislature may take action to uh that would impact
one of our revenue sources. We've got national, state, and local economic factors that um could present some kind of risk to our sales tax collections. And then finally, large one-time audit payments that we do not currently budget for. Uh present some upside risk to our sales tax projection.
We currently don't project large one-time payments. um those just kind of come in and they we we haven't currently incorporated them into our projections. Can we go to the next slide? That completes our sales tax discussion. We're going to go to state shared
revenues um for income tax. This is also called urban revenue sharing. Um, so how it works is, uh, 18% of the state's income tax collections is distributed to Arizona cities and towns, and it's based on the city and towns percentage share
of the overall population. Now, there is a two-year lag between state collection of sales tax and when that sales tax is distributed to the cities and towns. So, for example, sales tax collected in fiscal year 2023 is then distributed to the states, I'm sorry, to the cities and
towns in 2025. So the good thing behind that is that it's it's rather predictable. We kind of know what to expect in a given year because it's based on collections from two years ago. I just provided a little bit of information. Since the the income tax,
the urban revenue sharing is distributed based on population. We make assumptions about growth rates. We assume 1% annual growth in Scottsdale's population and 1.7 annual growth in Arizona's population. Um the overall result of that is that
Scottsdale's share of the pie um so to speak would get gradually smaller over time but the overall size of the pie grows significantly enough to ensure that our piece is always that our raw dollars is bigger typically. So we we may be losing ground but the the pie
grows enough to um so that our our urban revenue sharing is not decreasing I guess is what I should I'm trying to say. One thing to be aware of is that when a new city or town incorporates, they become eligible for state shared revenues. And this happened this past year with Santan Valley, which created a
new town of about 100,000 people that are going to be factored into the calculation starting in uh 2627. Can we go to the next slide? So, this is a similar chart for state shared income tax that we looked at for uh sales tax. We have our adopted budget
in red and then our actuals in yellow. they track fairly closely because again it's fairly predictable what we're going to get because it's based on collections from two years ago. Um I'll just I had I have included numbers for a few um actuals. I just
want to point out a few things that happened in fiscal year 22 that decrease that happened there. Um during the COVID pandemic the deadline to file taxes was delayed to July of 2020 which pushed those uh those income taxes out of fiscal year 20 and into fiscal year 21.
So the fiscal year 22 urban revenue revenue sharing fell as a result and then it kind of rebounded the next year and in 2024 we saw a fairly big uh spike. There's a couple of factors there. Um just overall strong performance. There were significant
capital gains that occurred and then also an Arizona resident apparently won the power ball. Won almost $500 million. So that was listed as a factor. Um we saw revenues decline in fiscal year 2025 as the uh statewide flat flat tax came
into effect and we do anticipate a further decline in FY26. Could we uh get one click forward? So year to date the uh state shared income tax or or urban revenue sharing is about a half a million dollars and 3% higher
than budget. The final calculation for this happened after we had generate our projections. So, it's off slightly uh but still fairly close. Uh next slide. So, just a few risks to the state shared income tax. Uh conformity to the one big
beautiful bill act or ABBA. I just want to take a second to talk about this. Conformity is kind of a wild card out there. There were significant changes made to the federal tax code in the ABBA. Arizona often chooses to conform with those types of changes and has
typically conformed in the past. The state joint legislative budget committee or JBC, they estimate that conforming to all of the changes would result in a revenue loss statewide of 440 million starting in fiscal year 26.
If they did full conformity, that would reduce our our projections for state shared income tax by about $3 million starting in uh fiscal year 28. So that's something we're monitoring. Uh we imagine that we'll know, at least we hope we'll know fairly early in the legislative session what they're going
to do about conformity. We have population growth risk. If the state grows at a different pace than Scottsdale, if if our assumptions end up being off, we could see our share of the pie get larger or smaller depending on what happens. And then of course the national and state economic factors as
they result relate to income tax state shared sales tax. Uh very brief description of how this works. Um a percentage of every individual sales tax classification at the state level has a designated percentage and that percentage goes into what's called the
distribution base and then 25% of that distribution base goes to cities and towns based on the population share. So, similar to state shared income tax, and we make the same population assumptions for this one as we do for income tax, again, we have budget in red and actuals
in yellow. Um, they follow fairly closely. Uh, they were kind of humming along from fiscal year 13 up until the pandemic. They were increasing at about 5.8% on average. And then you see a similar I guess bubble to what happened with the local sales tax where we kind
of anticipated the state shared sales tax would fall a little bit as well and it didn't end up doing that. It ended up increasing over those years. So, um, now we're more or less back on trend in the last couple of years. And so far through
October, that's four months of the fiscal year, were about $600,000 and 5% higher than the budget. Can we go to the next? And then just similar risks, population growth risk, and then economic factors that would threaten sales tax collections. And
then, uh, I guess economic factors are so important, I listed them twice. So just things to pay attention to. Um state shared revenues for auto inlue. What this is is uh when we when you register your vehicles about 20% of
those revenues collected by ADOT for the motor vehicle registration are distributed to cities and towns. The formula for this one is a little bit different than the ones we've talked about just recently. Um what this one does is it considers the county of registration and the 20% is allocated to
the counties based on the county of registration and then each city's share of that county's population is how the money is distributed. So for that reason the Santan Valley Incorporation doesn't really impact our revenues for this particular revenue source.
Can we go to the next? Thank you. So going back to fiscal 13, um we started about $7 million a year. Actuals went along at an average increase of about 5 to 6% a year. And then when we got to fiscal year 22, we saw two years of
decreases in the actuals on the yellow line. So we you kind of saw the divergence in fiscal year 21 and then we saw a couple of years of decreases followed by one increase in fiscal year 24. So when we were doing projections for this last year, we had saw the two
years of decreases and then one year of increase. And we wondered if maybe there was a new base. And so we projected 1% into the future, which you see on the other side of the dotted white line. Uh when fiscal year 25 ended, we ended up about a million dollars higher than our
projection. And you can see that can we go forward one click? You can see that through October we're about 10% higher or $400,000 higher than projections. So maybe we don't have a new base at this point. Maybe we need to and we'll take a look as the data comes in and we'll
adjust our projections accordingly. Um that's uh autoloo state shared revenues for auto andlu. Can we go to the next one? Oh yeah, I'm sorry that's just the adopted budget forecast on the right hand side. Next slide. This is our last state shared
revenue, a HERF or highway user revenue fund. This is predominantly funded by a statewide tax on gasoline, 18 cents per gallon. And then of the of that revenue, 27.5% of those HERF revenues are distributed to cities and towns on a monthly basis.
So half of that is based on relative population and then the other half considers county of origin. So for the 50% based on relative population, Santan's incorporation would affect us and then for the second 50% it would not
and her revenues are deposited into the transportation fund not the general fund and therefore they are restricted for street use. Budget and actual going back to fiscal year 2013 adopted budget in red actuals in yellow. When we look at HERF, we see growth of
about four 4.1% going back to fiscal year 2013, but um we see that growth start to tail off a little bit starting in fiscal year 2020. Um going from fiscal year 2020, that growth rate was about 2% from 2020 until today. That
makes sense to an extent um with the growth maybe in EVs and more fuel efficient vehicles. Um and through October, the revenues are pretty much right on target. So, um, maybe we're this slower annual growth rate is maybe this is the new base. Of course, we'll
keep monitoring it. Primary property tax. Uh, we show we've shown this in the past. This shows the distribution of primary property taxes um based on the average property tax rates in Scottsdale. Overall, the rates may change from place to place depending
on the special districts in your area where you might live or pay property tax on and the school districts and whatnot. On average, 8% of the overall property taxes is due to the primary property tax and 7% is due to the secondary property tax which goes toward debt service.
Can we go to the next budget and actual back to 2013 tracking fairly closely um the average annual percentage growth is uh 2.4% since fiscal year 2013 and that's pretty much what we projected into the out years.
Could you click forward? I think those data labels will show up. Yeah. So, we were projecting increases of 3% 3.1 3% 3% 3% into the outy years. I want to talk for a second about the large decline in fiscal year 25. Uh the yellow line taking a dive there due to the
refunds that were issued as a result of the quasmire lawsuit, which I believe all of you um we've talked about in budget review commission meetings last year. We're not going to consider this dip in our future projections. We consider that to be a one-time uh one-time occurrence that we will not
plan on in in future years. Through October, the property tax revenue has started to come in. It's a little bit below budget, but it is still too early to make any big picture statements about the state of property tax, primary property tax, I should say.
Uh could we click? Let's see. Yeah, one more. Yep. Yeah, we're about $900,000. It says, yeah, $900,000 and 13% lower than budget. We'll keep an eye on it. Okay. Uh, next
slide. So, this is the last tax revenue source we're going to look at in this presentation, and that's transient occupancy tax or bed tax. Now, not to sound like a broken record, but starting in 2013, um, things were kind of humming along fairly um, dramafree at about 8%
per year on average. purchases started at just under $15 million in 2013 until the co pandemic toward the tail end of fiscal year 2020. We did adjust our projections downward in 2021 and you did see the actuals go down in 2021 a
bit. Um although our projections were still a little bit below the actuals. But then as things opened up a little bit more, people traveled more and we see another similar bubble where the actuals, the growth was abnormal, and we've started to see that correct itself
a little bit in fiscal years 23, 24, 25. We had a decline in fiscal year 2024. We stayed pretty flat in 2025. And then our projection in 2026, the current year, was a decrease down to $33 million from 35 in fiscal year 25. and
we are 18% below so far budget to actual through October. Uh that number I I mean is a bit concerning. I would offer a caveat and say that we're now entering into the super season and we're going to be closely monitoring um those trends to see what's going on.
And can we get one more click? Uh yeah, that just shows yeah 1.4 million and 18 18% lower than budget. So, that brings me to the end of the tax um historical revenues. Uh we'll be happy to entertain any questions you
might have. >> Oh, please. >> Can I just make a comment? I think >> Sure. >> I think Scott actually said this, but I wanted to make it clear that the projections that you that you see for fiscal year 27 through fiscal year 30
are our last year's projections. They're not our new projections for the budget. We're still working on those numbers. We won't have those numbers finalized yet, but the message is we don't think there's a whole lot of change. It might we might tweak it a little bit, but it's
probably going to look very similar than what we had last year. Thanks, >> Commissioner Carla. >> Yeah, just a question. It's been all over the paper the past week that Scottsdale's growth rate is flat, which personally I'm not sure is a bad thing,
but how does that affect this or is it if it stays flat, I mean, is there going to be an issue or how does it play into this? >> Commissioner Carla, are you asking about the population staying flat? >> Yeah, that's what the articles have been about is that it's it's flat.
>> It's a flat population. Scottsdale. >> Well, that would certainly present impact directly on our state shared revenues that are distributed based on population. So, if we are truly flat, our assumptions were that we would grow at 1%. So, if if the new population
numbers show us at flat and maybe Arizona's population grew maybe at 2%, we would lose our piece of the pie would decrease compared to other cities. Um, and of course, the actual amount will depend on those numbers that come in.
I also wanted to add that we're very driven by tourism. So our population may be flat, but if our tourism is increasing, that would also contribute to to the growth of our revenues as well. >> So it's not a horrible thing if our
population growth is flat. >> Not necessarily. >> Okay. Thank you, >> Commissioner Carl. I would agree with Sonia. Not necessarily. Commissioner Stevens. Uh >> yeah, Scott, thank you for um thank you for answering my questions I had in advance throughout your presentation, so
I don't need to go over that again. Uh I've got an interesting challenge I'll pose to you all and coming from a conservative accountant where one of the postulates of accounting is conservative. This is going to fly in the face. You have a lot of recurring auditing uh revenues, revenues seem to
always be coming uh more favorable for you. you have a lot of recurring audits. There's always auto audits and you always have pickups from that and you indicate you don't like to include that. But um I guess one of the things to think about when you do your sales your revenue projections this year is whether
you should be just a touch less conservative in in looking at all those things. So I I'm conflicted in saying that but you're always way under. And the other thing is prickly with the system conversion I believe you got a lag in revenue being reported. So Scott, I think on one of your slides you said
you were fa quite favorable to budget already and there's probably unrecorded revenue because of the system conversion since you're only recording the you know the cash is all recorded but there could be some other pickups. Do you want to address that Sonia? >> Sure I will. Um yes thank you
commissioner Stevens. um we will start to look at you know I don't want to use the word less conservative because our philosophy and policy is that we will be conservative with our revenue projections but you have to keep in mind that the last five years was was anything but normal that was
unprecedented growth I think it would be hard for the commission to accept us projecting a 20% increase in sales tax revenues if we brought to you a 20% increase or even an 11% increase you probably would say put that number down.
So we have had a very unprecedented unusual last 5 years and now we're looking at some reduction and flatness. So it's hard it it's it's a very difficult projection to make because it's it hasn't been a normal consistent
trend. So prior to the pandemic, if you look at the last five years, last 10 years, last uh uh 20 years, we we could say that our average growth has been 4.5%. If you look at those those time periods,
you know, going from maybe minus 2% to maybe 8%, but not 20%, 11%. And so it's just been a very difficult very difficult for us to project. We also uh have not been including um sales tax
audit recoveries. We have always um I think in the past recovered about two to three million in sales tax recoveries, but we have expanded our sales tax audit department a little bit and we're now seeing some spikes in that. So we're considering maybe we should because when
it used to be two to three million, we just did not include it. But now it's it's 6 to9 million potentially in some years. So we may we we're looking at maybe including those in our projections that will help bump that up. Uh we hope that at you know uh soon that our sales
tax revenues will go to a go back to a more normal trend line. We just don't feel that we have a normal trend line to be able to project off of. So it's been very difficult. But we welcome the commissioner's um recommendations. We will pro provide for you our um new
fiscal year 27 and 5-year projections in uh March. And so we welcome any uh suggestions that you might have if you feel that we should bump that up or you know whatever it is, we welcome that. Thank you. >> Mr. Vice Chair, may I may I respond to something? Commissioner Stevens, um you
mentioned about system conversion. Um the vast majority of what we talked about in this presentation are not impacted by that. mainly we saw that through court fees and fines and also through franchise fees. So our sales tax for example has not been collections has
not been impacted by system conversion. It's just when we went through the budget to actual stuff there were several references throughout there talking about things not being recorded because of delays in system conversion. You're just saying that these revenues aren't part of that.
>> Correct. I am saying that that's true. Okay, >> Skyler, you had a comment, I believe. >> I do. Can you guys hear me? Okay. >> Yeah. >> Just a just a quick clar clarifying question about about the transient occupancy tax given the variance of 18%.
Is this something that we've experienced before? Um, and are we confident that we're going to get close to hitting our uh budget number? Um, and if if not, um, you know, maybe we should maybe we should all buy more Powerball tickets, make up for that decrease.
>> U, Mr. Vice Chair, Commissioner Baden, um, I I don't know that I can speak with confidence that we will meet our budget number for the current year. Uh, we are, as it says, 18% lower than budget. We'll continue to monitor and things, it's possible things will turn around in the
upcoming months. If not, we'll adjust our projections accordingly. >> But have we been there previously? >> Have we has that been has that >> Commissioner bad? >> Um it's possible that we've been here in the past where four months into the
fiscal year we're below budget. I would have to research that and get back to you. >> I I mean, let me add to that. I think the the transient occupancy tax which is our 5% bed tax that's charged to hotels
and motel operators it's a lot more volatile because it is based on tourism and also hotel uh room prices and and room availabilities. So uh there is more volatility in in these numbers. We are
uh considering if we should look to some industry experts that have more uh data in terms of visitor data and um trend data that can assist us to better project these re these revenue streams
>> and we've all seen the articles about the uh downturn in visits from Canada and from Europe uh and other countries coming here and that directly affects our hotel occupancy. So, you know, some of this may play out over a few years,
but I think that's a very good point. >> And correct me if I'm wrong though. I >> like on the budget to actual, I thought on page 14 or 15, you were you shortening revenue and you just shorted the destination marketing funding that's being done. So, isn't there less sensitivity to this particular tax being
under because you would then reduce the funding so it's not quite as catastrophic? Okay, >> Carl, I was trying to be politically correct, >> Skyler. >> No, I just I I didn't Was there an
answer there? Oh, he he didn't hear whether or not the answer to my statement was correct or not. That on the transient occupancy tax, if there's a shortfall there, it there's a commensurate reduction in the funding you do for destination marketing. So, it's less of a budget
concern than maybe some other revenue projections would be. He wanted to know if that was a true statement. Yeah, I think the way we would uh respond to that is in our special revenue funds, all of our special revenue funds, there is more ability for us to reduce
expenditures because there um mostly not all of them. Uh some of them are not core services and it's easier for us to and I can let um city manager Katon comment on that, but there is more ability to do that and we always work to align our uh budget to our expenditures.
We wouldn't make midyear budget adjustments if necessary. >> Just add to the conversation of the 5% tax here. The 45% that goes to a vendor experience Scottsdale is paid off actuals as my understanding just paid on
actuals. >> Thank you for explaining that. >> Thank you. Uh if there's no more questions, I think we'll move on to the next segment which is the uh Oh, sorry. >> Yes. Um, we the in the packet in front
of you, we have so we've spent much of our time tonight talking about taxes. Oh, can we go back to the pie chart that was on I believe slide two or three of the presentation? So, we spent the majority of our time this evening talking about the blue uh
orange and green wedges of that um of that pie chart. And we have in the packet in front of you the all revenues for fiscal year 2526 along with a 5-year history that we gave you five years because that 10 years would just be way too large. And we get down to the line
item detail level here. So we will go to let's see page if you would go to page five we get past our tax revenues to our non- tax revenues and we'll just take a look
at some of the big picture trends. So building permit fees and charges if if you want to compare to your cheat sheet those are in the general fund column in the pink fees and charges. So these are what are encompassing that category here. So looking at building
permit fees and charges for the general fund, um we increase from uh 17 million in fiscal year 21 to we're projecting $23.8 million in the current fiscal year. Looking at the next category, which
>> Oh, okay. Yeah, I'm we're still on page five of this packet. >> Yeah. >> So, under general fund in that first column under license, permits, and fees, you see that's not a massive driver, but
we have the individual line items there, business licenses, liquor licenses, and things of that nature. When you add them all together, it comes up to about in the fiscal year 2526 adopted $5.7 million. All of those together.
Next category is charges for service slash other for the general fund. The biggest driver in this category, we're now turning on to page six. And
about seven lines down, you start to see Westworld rental facilities. A lot of the driver of this category is Westworld. Um various revenues that come in at Westworld. And then about halfway down, there's a fairly large revenue source for
tournament players club. We have storm water fee which is about $962,000 in fiscal year 2526. And those are some of the biggest drivers of this category. And then if
you and parks and recreation, thank you for that. Parks and recreation uh charges for service. We get up to the total for this category of about $20 million for fiscal year 2526. I'm on page seven. Next category is
fines, fees, and forfeitures. Here we have a lot of um court type fi fines and fees. We have photo enforcement um kind of encompassed in this category here as well. If you go to the bottom towards the bottom of page seven, the
fines, fees, and forfeitures category generates about $7 million for the general fund. Intergovernmental for the general fund. It's just one line item there, just about a million and a half. And that is the yellow portion on your cheat sheet.
General fund first column down to intergovernmental. And we have in that number school resource officers and the Salt River Puma Crime Lab Service in that line. Going on to page eight. Interest earnings is fairly significant. Um we're
projecting about $1 million in fiscal year 2526. indirect cost where we charge our enterprise funds for the uh indirect costs is about $9.2 million. And then our o revenue on page eight.
Okay. Uh the other revenue is a very small portion of our of our revenues. Next we've got ambulance. We're projecting about 7.7 million on the ambulance fund. Next fund is a transportation fund. Not any huge uh revenue amounts there
except when we get down to interest earnings on page nine about $2.6 million to our transportation fund for interest earnings. Tourism fund the largest driver about halfway down through page nine is the Scottsdale Princess um revenue c lease
revenue category uh 3.6 million overall for charges for service. I'll move on to the special programs fund towards the bottom of nine. The storm water fee for the CIP is fairly significant. Uh just under $8 million.
And then we see some McCormick Stillman uh operating revenues there, charges for service. Turning to page 10, overall the charges for service in the special programs fund about $16 million. I'll skip the fines, fees, and
forfeitures and the intergovernmental and the you get down to other revenue. A couple of the significant revenue drivers there, the smart and safe distribution, which is about five lines from the bottom. That is the taxation on marijuana and opioid settlements. That's
a couple of million dollars each. Stadium fund contributions and donations. It's about $2 million a year uh for the whole category of charges for service. I'll move down to grants fund.
So the grants fund total uh under grants where it says grants 230 total that's federal overall federal state aid about 6.7 million in fiscal year 25. That's kind of fallen from our fiscal year 2021 which where it was at 16 million. So that's kind of changed over the years.
That was kind of the high watermark of federal aid. The next is CDBG. Uh that's a fairly significant grant that we have. Turning on to page 12, housing choice voucher program in our
grants fund. That will be about 10 10.8 million in fiscal year 2526. Now we're getting into the enterprise funds on page 13. We'll just look at the water 600 total there. Um $146 million um going into our
water fund for the utilities and enterprises. That's user charges, uh service charges, and water usage charges. Water reclamation fund about $62 million. Turning on to page 14. I think we'll probably skip through page 14, but there
are other revenue sources listed there. we start getting into um interest earnings. I think we'll probably skip through that as well. Going to page 16, solid waste fund. Under utilities and enterprises, this is
listed at the very top of page 17. The total for solid waste fund, we anticipate $38 million in charges for solid waste. Most of those are residential charges to our residential users and also frontload um commercial customers.
Aviation fund about $9 million um bottom of page 17. And then we get into our internal service funds which is on the second page of the cheat sheet there and healthcare service fund on page 19. Our largest driver there is the benefits
self- insurance total. About $41 million almost all of that is contributions made by the city uh for um health healthcare contributions and employee contributions as well. Those are the biggest drivers of that 41 million
fleet management. Um there was a question the the fleet management fund used to be one singular fund and then it was split into two. So that's why you see the fleet management total halfway down page 19 go from almost 30 million down to 16.5 because we created the
fleet replacement fund at the bottom. So you see a fairly big revenue in the fleet replacement fund in fiscal year 2526. Going to the last page almost done I promise. Um risk management fund. The biggest driver of revenues into the
risk management fund are charges for workman's comp and that went from 11 million in fiscal year 21 down up to 20 million in the current fiscal year. Uh covered a lot in this packet but um happy to address any questions that you may have now or in the future about any
of these individual revenue sources. >> Yeah. Um so basically what we wanted to share with you is sort of our line item details for these revenues. When we project revenues for the budget, we do project every single line item. As you can see, we do work with each of the
departments. And so if you look at the pie chart, we have, you know, the fees and charges is a very significant piece of our revenues, but that's primarily driven by the fees and charges in the general fund and also in our water sewer
fund. Aside from that, the rest of the fees and charges are not the lion share of our fees and charges. And so we do work with the departments to develop those uh revenue projections, but we wanted to share these with you to let you see what those revenues are made up
of. >> Thank you, Commissioner Carla. >> Yes. Hopefully, just one real quick question. Most of these as you go through the actuals to the adopted, it's it's they're there's not great variances. They and they all make sense
except when you go on page 15 and you go to your water reclamation 603 and you go to I mean you're dropping from you know 623 to 40,000 and I'm just curious why
because that's >> which line item are you looking at >> water reclamation >> page 15 water reclamation like 3/4 of the way down the bottom and it says water reclamation 603 total and the adopted budget has dropped all
the way down to 40,000 and I'm just curious why from like 623,000 and because everything else here you know in the entire thing it's all pretty even and there's not giant variances but this is a big variance and I'm just
curious why >> okay we'll have to look into that and get back to you on that I don't have the answer right now >> thank Thank you. >> Uh, Commissioner Stevens. >> Okay, folks. Uh, I'm going to I'm going to make a big observation of what we're doing here. Uh, my understanding is we
are only allowed to talk with each other and brainstorm to come up with ideas while we're in these meetings in front of the public. Uh, so we're limited to that that as far as our as far as our forum. Today, we've probably spent well over 70% of our time, maybe 85% of our
time, listening to presentations of materials we've received in advance that we read in advance. We've come up with a few good ideas today of suggestions on different funding and uh and maybe interest expense and use of reserves, but frankly, we haven't had a chance to talk to each other. And we're charged
with being a budget review commission that's supposed to come up with recommendations to council. And the way we're going down this right now, I don't see a forum here where we get to talk to each other and come up with some recommendations that are meaningful. So I I part of this is probably necessary
to get the new members up to speed on how things work. So I'm not being critical on that. I'm just making an observation, folks, that I think if we can't talk and brainstorm with each other, we're not going to come up with anything that's going to be that helpful. And also going over stuff like this uh first time in a meeting is kind
of hard to do. Uh I came with my questions and I had plenty and it would be better if we just saw the material in advance and came with questions and had more time to ask our questions and talk and brainstorm than just kind of being fed information. So I um I I don't know
where to go with that. Uh but we're already you know we're out of time. We're already at your time. We're supposed to be done with this section and go on to the next one and we haven't haven't talked about anything. So, I guess my recommendation is going to be uh that we either think about trying to have less presentation time so
the commissioners can talk more or if you want to go over stuff like this with us, let us come down to the office, go through some of it, get our head up to speed so we're better prepared when we come here and we can use the valuable time here to actually brainstorm with each other.
So, and if I'm if I'm wrong and you guys are all happy with what you're doing, then just keep doing it do it this way. I will continue to do my prep. I will continue to provide staff my questions uh in advance so they have a heads up on that and I will only be providing that to them and they'll decide if they want
to forward it to you all. I won't be directly communicating with you all anymore just to play it safe and I respect that. So uh we provided this because I think the commission had asked for a level of detail with you know more than just a
presentation. So this was our effort to provide that level of detail beyond just the presentation. Um to the extent that we were not able to provide this I mean our staff were pretty busy. We have a lot of work to do. We were literally finishing this last night and you know
it it it would be nice if we were able to just push a button and out pops this report from the system but the report doesn't pop out looking like this. There's quite a lot of work to do to put it in this format so that it can be easily understood by the commission. We can do it a different way if it would
help you all have more time to um and we will do our best to provide this information in more advanced. But this was uh we understand that this was a tough um work through in terms of the detail that we have to provide. But we
do have to work through these details in an open meeting and not in in offices and you know and so we do have to provide this information in open meeting. We do understand it's tough to go through this detail. We do expect, you know, we don't expect you guys to be
able to understand all of it, but we will welcome any kind of follow-up questions as you guys have the opportunity to look through it. And we we're just um helping you as best we can. Commissioner Carla. >> Um, I I respect what Mark's saying, but
I found the presentation walkth through, even though I read it all ahead of time. I found it very helpful. And I think for the public that's watching this, it is very helpful. And if they're going to understand what we're doing and what staff does, again, very helpful. if
there is not enough and and I from what I understood we all got to ask our questions. So, um maybe we schedule less stuff on the agenda. So, if if um Mark wants us to have more
intercom discussions, we do that. Or is that what comes when we actually see the proposed budget? Because in my mind, that's when we're going to want to have discussions. So, that's just my two cents.
And I'm not opposed to having some time carved out a after a presentation for after the questions are over for some little discussion between us. Um, we'll see if we can work that into the time frame because Mark, I I tend to agree with you that it's good to have that
back and forth some. I also agree with with Carla when we see the budget is when we'll really want to have those discussions. Okay, let's go ahead and go down that path. But I'll tell you, I do not like being unprepared for things. I like being prepared so I'm ready and I know
what's going to happen. And if you're telling me I can't have something like this in advance, I I don't want to see it in a meeting. Uh find some other way to have us do what we're going to do. I would rather have whatever you're going to talk about or present to us. I'd rather not get it cold in a meeting because it's only going to be hard to
get my head around and I'd rather have those things in advance. Uh and I would like to have more time to talk with the the the commissioners on this. So, uh, >> well, Commissioner, >> just just one point one point. They said that they were working on it just last
night. So, probably didn't have enough time to get that that piece of the detail out, but I mean, we have two pretty meaty reports here. We haven't gotten to the monthly financial depth there which I you know I think we're kind of out of time but I would like I I to me the report that we had at the
beginning we went through in terms of the um the uh financial conditions I think that's appropriate level. I think the monthly financial report I've read through that I spent time yesterday and today reading through that so that's the appropriate level. I was able to glean out the four or five things that we're
going to focus on at least in my mind. Now Matt, to me that's the level of discussion here. I think the the accounting level of discussion and got to trust staff to be able to go through that based on those broader directions that we have and and I think that's where we that's where as a practical matter I think that's all we're going to
be able to to get to unless we have just meeting after meeting after meeting week by week. Um so that's that's my view of of that. I I feel like we've gotten to a level of that captured what I was looking for in terms of metrics as a board level type of discussion.
>> The the most meaningful thing that I was looking forward today was going over the monthly financial budget to actuals. I found that to be the most helpful, insightful, and most prone to come up with ideas and we're we got 13 minutes to go over it. So anyway, uh I guess my request is
consider cons making the presentations more concise. assume we did our prep and we read them and try to give us more of a highle presentation so that we have more time to talk about things and maybe it will be more relevant once you get us the new budget information. >> So we have 15 minutes left. Why don't we
spend time on the monthly financial report? >> Yes, let's go on to that right now. >> Okay. Uh you should have the quarterly financial report. These reflect figures through September of 2025. We'll just I'll start going through
pages and if there's areas that you'd like to focus on. Um can >> can we I'd like to stop. Can we just ask questions now? Didn't did you all have a chance to look at this? I'd rather start with questions about this and then if you think we're missing something then go over a couple of those things that
were that are important. And and one of the things I know I would like to see is the fact that I would like to understand where you're at on the system conversion because I saw scattered all throughout this document that revenue has been delayed and being recorded because of the conversion. I'm not sure if payables things are being slow and being
recorded. So I'm interested in the quality of the information that we're looking at now and what and there are a lot of timing differences in there and I'll assume the timing differences are going to flush out later. And so, uh, I is there anything you want to share about the system conversion because my
assumption would be that revenue is understated. >> No, I'm sorry. Then maybe that's a misunderstanding. I'm actually going to ask my assistant city treasurer, Anna Hanthorne, to speak to the conversion and how that has affected the um recording of our revenue and
expenditures. Anna, can you come speak with that? >> Yes. So we had a system conversion changeover that started at the beginning of July. So some of the timing issues in the first quarter were a result of um
there was a court entry that did not make it in until the following month. So there was a timing issue with some of the court revenues um as well as one of the property tax entries. um it was a very small amount for the property tax because we get the large amounts in
October, November time frame. Um and then the only other one um that we were reviewing is there was an issue with the franchise fees that comes from the water and sewer funds and it goes over to the general funds. So those are some of the
timing differences on the revenue. Uh related to the expenditures, we always have a little bit of a delay. Um the reason for that is we do acrual backs uh for most activity in July. They go back to June uh for those acrals. So I think
the um information that we saw with the expenditures is very normal. Um all of the invoice processing for the first quarter was in um we haven't seen a lot of um any issues or delays from the system for that. Um we have a uh refined
process uh between the budget and the accounting office now where we'll make sure that everything is in on time. So we've really tightened up those processes. Uh we don't anticipate to have these types of budget to actual differences related to any system change
in the future. >> I want to make one observation though. the stuff you guys put out with the monthly analysis and your explanations is really really really good and I rely on this a lot. I think it'll help us a lot. The only other thing maybe if you can add when you indicate something was
a timing if you could then also add what you think's going to happen the rest of the year like you said this one we're over five million because of advanced commodity purchases uh that were timing well it would have been nice if it's and we think we're going to run over by a few million or we think it's you know
we'll correct itself over the next two periods if you did that it would really just eliminate a whole bunch of questions but this stuff is really good you guys do a really good job on this and on the monthly ones you put out. >> And I have one question uh just
procedurally because I'm not sure. Um Mark, I I I agree that it would be handy if we assumed that we had all read this material and we could just ask questions, but how much of this for the public consumption for people that are watching this that that don't have these
documents? I mean, how much of that do we need to go through and make the presentation so that people who are watching it? Um, and I think I'll turn that over to the city attorney. I saw that look, so I assumed you wanted to ask me that question. Um, chair and members of the commission.
It's really up to the budget commission. Um, I think it is helpful uh to have the presentation so the public is fully informed. Uh the main thing the commission has to worry about is proper agenda and having the the the public um
have an opportunity to hear what's going on. I assume the public has access to the materials as well through the web page in advance so they can also re review those. So it's really a commission decision um on how extensive you want the presentations to be.
>> Commissioner Carla. Well, I have a question because obviously we can't go through the same walkth through on this and also do future agenda items and get out in our two hours because there's eight minutes left. Now my question is could we just
do bump this to the next agenda item and do an abbreviated like 10 minutes on this so the public will see something and um because it sounds like Mark is already asking his questions which is again good questions um
and then move on to the future agenda item presentation that we asked last time for Sonia to do. So I I'd like to make a suggestion. So our next meeting is in January and we were planning on focusing on the capital
improvement plan and we will probably be working on our second quarter budget and actual it at that time. So it might it might overlap and it might be better to just wait a little longer. We can
give you a report in March on the two quarters. >> Sure. Yes, that sounds good. >> Commissioner New Hope, >> I agree with that. We're only one quarter in. And so the variances look small, but that also becomes a bump in the rug. And so the only question I had out of all of this was um really more on
some of the larger capital projects, things like that, because there was timing and some of the police and fire purchases were delayed. >> To what degree is that just simply, oh, well, we know it's going to come, it just didn't come when we thought because it's just a cash flow timing issue. Or how much of it is, hey, we're over we're
overestimating when the cash flow is going to happen and then it doesn't happen and it gets delayed out or do we have a problem or third do we have a problem in getting it spent and now we do have a do now we do have a real a real structural variance that is not going to get better.
>> So commissioner Newman um as far as capital projects are concerned they really are project by project. So every project has a different story and for this report that you have we currently do not have a capital project budget in
actual we will look at what reporting we can provide for that but each project has a different story so I I can't generalize that way >> in this I didn't see anything egregious but I just saw that there was a lot of timing things in there >> is it small and it's kind of okay it's just data error you know in in in the
way things are happening in the first quarter once you get six months in but then six months in it's getting almost too like to correct it if there's a problem. So I'm just trying to get a sense qualitatively is there a problem anywhere that that we've identified or is it just more the way the numbers >> fell. Okay, thank you for the question.
Um the timing differences are very normal for us especially in the first quarter. So we basically budget for the year and we basically try to estimate how much will be spent or how much will be coming in each quarter. And that can be kind of tricky as you can imagine the
the amount of um you know the various and the complexity and the different types of revenues and expenditures that we have. And a lot of times we look at that those projections based on the last year cash flow which may not be anywhere close to this year's cash flow. But you
know that's all we have to rely on sometimes unless there was specific information provided by the department that they know when this is coming in or when this will be spent. It's very hard to so we do expect those timing differences. We don't consider those timing differences to be a huge red flag
and we do monitor the budget and actual and the commitments that we have. And all I would ask is that we flag if we have if we have some kind of a structural problem or something that is abnormal because it's hard to stick the landing at this granular level at this early in the in the year. So but if there's something there major going on that people need to know about then I
think that's worthwhile discussing. >> Yes absolutely. So our budget analysts do work with the departments to understand these budget to actual variances and if it's just a timing issue we're not usually worried about it about it and we do try to find out if there's if there's going to be a end of
the year problem if there's going to be a you know overall problem we do do that >> so Mark could I make a suggestion that because we do need to move on which is that we um going forward we assume that all of the commissioners and all of the
audience has looked at the materials in advance and I don't want to completely cut out the presentations but I would like abbreviated presentations so then we can get into asking the questions that that everybody has. >> Great.
>> Is that agreeable to everyone? >> Yeah. >> That's also consistent with council where you can go online and look at everything that they're in right in consent agenda and everything. You can look at that and it's up to the public to do that because we can't spend all of our time here educating the public.
That's not the job here. If that's agreeable, I think we would like to do that moving forward. And speaking of >> I got to do one more thing. I I know I seem real frustrated and I wear my emotions on my sleeve sometime. You all need to know how much respect I have for
you, how good I think you people are, and I hope you don't take anything negative out of my frustration and in what I just said. You've got some wonderful people on your staff here, and we rely on you. And I want you all to stay here.
noted. And with that, we're going to go on to the uh items be presented at upcoming meetings. Can you pull up the slide? So, this was requested by the commission to give you guys an idea of what we will be providing at the next meeting. The next
meeting in January 22nd will be focused on the capital improvement plan. We are working towards um reviewing those uh submissions from the departments. The city manager's office and his capital project review team has been working all
year on this and so we hope to be able to bring to you uh next slide please. Um, last year we brought to you a book that is over aundred pages long with every single project listing all projects by program with the project name, description, location, project
cost, five-year cost, and funding sources. We will have something similar. Now, last year's um budget book was produced from our old system and this year's um book will be produced from our new system. So, we're still working with our vendor to identify how we lay this
out. So, it's not going to look anything like last year, but it will provide the same information. Next slide. We are also planning on providing these lists to you, the list of capital projects this year with budget increases over 10% and 1 million. That is part of our
policy that we will go to council specifically and explain those to council. I think there are very few projects that we are aware of this year of any at all that do meet that criteria, but you will get a list of that. Um, we will have a summary showing the fiscal year proposed uh 2627 5-year
capital improvement plan with the carry forwards that we anticipate, the new requests and the proposed the new proposed five-year. And of the new requests, we will break that down to show you a list of new requests for new projects versus a list of new requests
for changes to existing projects. And we will uh also provide a list of if there's any projects that are eliminated from the five-year CIP. We may not have eliminated the project, but we may have removed the construction cost and left the design cost. We because we don't
know the construction cost yet, but we will share those with you. And then a list of completed projects. So if projects are completed and they're no long needing to be carried forward, we will provide that to you as well. So we're striving to provide this all this
information to you. um the um the new system we're unsure of what type of reports can be generated to provide this. So there will be some u manual work in order to provide that to you. >> Thank you. Yeah, I like that. I like
that. Could I could I just ask question and just this is just just going back to doing a presentation of the budget uh excuse me of the quarterly report >> and so the so what I would be looking
for as an overview would be any discrepancies that you noticed in the budget that didn't and any adjustments you're going to make to the budget based on information you now have to me that would seem to be the most significant information to get.
>> Yeah. >> Yes. Thank you for that comment. Um, Commissioner Poland, with the first quarter is really hard to tell. Yeah. >> Because a lot of times there may be budget savings that offset the if we have a certain category of line item
that is over budget. A lot of times we anticipate savings to offset that and the they end the year still within budget and so for the first quarter it's really hard for us to know uh there may be specific things that we do know. So if we do know specifically that we will
go over budget and we do need a budget adjustment we will bring that to you but sec first quarter is hard to tell. Even the second quarter might be hard to tell. But by the third quarter we will know this these items will require budget adjustments. And here's the
reasons why. >> Thank you. So, now let's go on to identification and approval of possible future agenda items. Is there anything uh Commissioner Carla? >> Yes. I have um in addition to the answer
on that water variant. I I last budget cycle we talked about how um the human services budget particularly at Pyute Neighborhood Center which helps low-income families and especially seniors was going to be impacted by all
of the federal cuts in that area and I would like to hear specifically how is it impacting it and how is the city making up for it so these families and seniors s aren't, you know, just
left a drift. Specifically, you know, for seniors, uh, the lie heap program, which helps immensely with, um, utility costs, and I know, you know, for a fact that that has been cut dramatically.
So, my question is, um, if we can get an update on that, that would be greatly appreciated. >> Thank you. >> Does anyone else open to it? Does anyone? No. Okay. So, if there's no other um comments on
that, I move >> I drew I drew a blank. I I thought I had something I wanted in there and I drew a blank. I'm sorry about that. Let me ask a quick question, though. If I want to look at a cost estimate on one of these contracts that we've got, is that something I can do in advance so I can see what's out of an estimation system,
what's out of a certain type of contract or whatever the cost buildup is on one or is that going to have to be done here? So, it's just not possible. >> You could do it in advance as long as they can provide it to you in advance. >> Okay. I might make a couple of
suggestions I want to look at and if it makes sense, you'll figure out how we're going to do that. Oh, I know what I wanted to ask. Let me know if this is possible and if it's not, we won't do it. Is do you do a reserve roll forward for fund balance and reserves and would it be possible to see something like that for the first six months of the
year so we can see the reserve and fund balance changes or is is that is that not what is that not something you do or is that sound pretty you know what let's not make that a future agenda item. Why don't you all kind of look at that to see what would be involved in doing that and make a
judgment about whether that would be uh of value. Okay. So, no future agenda item on that. >> And chair, members of the commission, technically as you bring up um future agenda items, you're supposed to come to a conclusion or decision whether to
agenize it for in the future. And you have uh three options. you have you can either um agendaize it for discussion, ask for a report or presentation, but you're supposed to vote on it. So, for example, Commissioner Carla's um suggestion, um the commission needs to
vote whether to uh agendaize it, give a pres or ask for a report on it or or take no action. Commissioner Carla. >> Um, I mean, I'm I'm good with a, you know, a report to us on it unless
there's huge deficits and then I would like to have it discussed as to how the city's going to make it up so these families aren't just thrown off a cliff. That's my opinion, but again, the group has to decide.
I'll I'll second it. I >> I >> Okay. >> And then I want to propose a future agenda item at the sole discretion of the treasurer uh with respect to
including a fund and balance and reserve roll forward if it is easily prepared. Is there a second for that motion? I'll second the motion. Any
further disc? Oh, Commissioner Newman, >> what additional information does that give us than we already already have? >> What right now? That's one of the biggest things that's kind of hidden in there. It'll tell you how much money might be available for PSRS uh additional advanced funding. You can see if uh what kind of surpluses are building up in the reserve and fund
balance area. You can see if there's been any reallocations or reserves. So, it's it's kind of a a separate little kitty that lets you know what might be available and then you can make judgment about do I do advanced funding on PSRS or do I need that for roads or whatever else it is. >> So, what action would the budget
commission take on that information? Once you know that, you then know whether or not you want to make recommendations about doing more uh improve the PCI quicker, about do more advanced funding for the retirement plans or uh make any other budget
changes that would impact police uh salaries. Well, no, that would be bad. That would be recurring. Uh it would it would just be it would tell you what's available for future budget adjustments if as things are presented to us.
And I believe last year we did look at that kind of information and that's what helped us come up with the recommendation to make a $50 million um payown of the pension funds. >> I have no further comment. It's okay.
>> I I just I just have trouble seeing how as a practical matter that that's going to make a big difference in what we're doing. I but but I I'll defer to the group on that. I I I'm I'm I'm not there. >> So motion's been made and seconded. Any further discussion?
>> Otherwise, all those in favor, please say I. >> I. >> I. >> You better take a hand count. >> So we have two eyes, one nay, and two silences. >> Well, can I just verify that the motion says that this is at the sole discretion
of the treasurer? Yes, it is at the sole discretion of the treasurer. >> Then I will say I. >> I. >> Yeah. Okay. >> Let the record show that after some discussion it passed unanimously. Is there a motion to adjurnn?
>> Motion to adjurnn. >> Okay. Meeting adjourned. Do we have we don't have to vote on that?