Work Session

Welcome everyone to the June 11th work session. And at this time, I'm going to turn it over to Russ.

Yes, you are. Thank you, Mayor. And good evening, council. Um, just go over the quick agenda tonight. We're going to review the meeting schedule and then we're going to have a discussion and probably a little bit of a summary of where we are to date um with the FY2027 budget and thank you for all your hard work you've done to that thus far and um probably don't have any announcements and I don't believe there's a close session just to close out the agenda um for this meeting. So let me turn it over to Jenny to walk through the work session calendar.

Yes. Um so this can this is your upcoming work session regular meeting calendar and we're going to talk about a couple of these dates. Um first being June 18th I believe if we are done with the budget discussions tonight that um date if council would consider if you didn't need it um cancelling it.

We don't need

Okay.

We don't need which one?

Um June 18th.

Does that work?

Okay. and I'm going to ask for another change and then we we can just do a motion so that we can do the motion here. Um the other one being July 28th that is a work session. It is actually the week after our work session regular um meeting combo and just a proposal to move it back to the 21st so that it's on the same week as the work session regular meeting if that's possible.

That works for me.

So we need a motion.

Yes. For those two changes. Yeah. And the motion would say move the July 28th work session to July 21st and cancel the June [snorts] 18th work session.

Correct.

That sounds like a motion to me. Motion and a second.

So Chris has a motion. Lor's a second. Okay.

Uh discussion. All in favor, please say I. I. Any oppose? Motion carries unanimously. Thank you.

Okay. I've got two more items just to make them real quick. And um we had this on the last meeting and bumped it to this one just talking about the standalone work sessions with a previous council. There was wordage said at that a work session that the standalone work sessions would last two hours and just wanted to check in to see if that is something we want to establish as a practice for this council or if we want to say you know the work session is the work session until it ends and if anybody had thoughts on it. I shared my thoughts last time. I I feel like we get into the groove, we get deep in discussion, and then we move on and we don't get closer to consensus or decision. So, I'd prefer for the standalone work sessions for us to work until the work is worked completely.

That also, just to make sure I um hear also what you're saying, that also means our when we have a close session added on to it, the it's the work session plus the close session, whatever it is. I agree.

So,

so go ahead.

I was just going to say, but our target time should try to be two hours or you don't agree with that?

When preparing the agenda, I think it makes absolute sense to try to keep it to a 2-hour agenda unless we have pressing, you know, business that requires us to go over, but yeah, I know there's a lot of council initiated items, and when you're looking to create the agenda, I think that 2hour time limit as a goal absolutely. I I just don't want an open-ended schedule like I don't want to be here.

Six hour work sessions. Yeah. Yeah. No.

Okay.

I think I like the 2hour limit and see if we can have heads up if the agenda you think is going to take more time so that we don't line up things after that. My understanding was that standalone work sessions were like you know going to be shorter. But you also mentioned that it's better for the staff as well to keep that way.

Our only issue is kind of as been said

was um we can we always try to prepare an agenda um thinking towards what you know a limited meeting would be. It kind of just gets to how much discussion you all want to have and I think one of our one of

[snorts]

um of an issues of late is just um close session and how long those might go as we wouldn't be able to predict that. Mhm.

I do think when we have close session, it would be nice to be able to consider to extend it because there have been work sessions where we only worked for 45 minutes or an hour and then had to close session. So, some flexibility,

but I also say it's um staff doesn't care. It's y'all's decision. And

um we appreciate going home at a decent hour, but at the same time um if y'all are in the middle of the discussion or otherwise um you know we we're here um you know there's if there's something in between and Jenny's done this it's largely as a part of a time check. So you know you may may want to institute just some version of a time check could be every hour um or whatever period you say just to give you some insight to how much longer you think it might go if that would be helpful. don't know.

So, what I think I heard is uh everybody, well, not everybody, some council members want a targeted work session, including the closed session, to be two hours or whatever. Uh, but I think sen don't let me put words in your mouth is saying no, set the limit and stick to the limit. Is that what

So, I'm saying the work session can be two hours and then if we need a close session after that, that's fine. Okay.

But if we set a limit, I think would be beneficial for us for PL from planning perspective.

Okay.

The standalone ones I understand the ones that are before the council meeting. I mean, we we they are

we're going to end on time.

Yes.

For the council meeting

hopefully.

Okay. So, we kind of need a moment.

I think we said the same thing.

No, I said the exact opposite of what you just said,

right?

Yeah. No, didn't you say that 2 hours you agree with two hours work session?

I I think preparing an agenda that is approximated to last about 2 hours is a good goal, but I believe that we I know especially the last couple of years when we've got so much on our agendas, there are far too many discussions that are shelved and then revisited and shelved and revisited and and I'd like to get away from that. That's nobody's fault. It's not that anybody was unprepared or or anything. It's just because things are atypical atypical lately, [clears throat] right? And I think once we get towards what is more of a calm sea as opposed to one with a lot of waves and unexpected bumps and stuff, I think then probably the work sessions will be more like they used to be where they're shorter and more managed. But I think

I think um my opinion is when comes the budget time the sessions will obviously we will be longer and we will need more discussion time but I think during summer and other times we probably need to manage some of this time. I don't want it to be five six hours work session honestly

and ultimately nobody's forced to sit here for any given amount of time at any given time. I could walk out I could walk out the door if it's just too long or I've got someplace I have to be. Um I think because we're flexible on the dates, if somebody like can't be there, we always try to move it. I think that allows us enough flexibility in our personal schedules so that it shouldn't conflict.

Let me try to compromise here. Let's say we had twohour work session. We're at two hours and a couple of us have to go. Um,

[snorts] can we make a mo are you okay with someone making a motion saying, "Hey, let's continue this at another time rather than just continue that discussion."

Of course.

If so, I think that can work.

I think that would be good. Yeah.

Yeah.

Okay. [clears throat]

And it would be one day a month.

Right.

I mean, it's not the two typically your Tuesday.

Mhm.

So, do you need a motion or are you okay?

You want me to restate?

I think I hear what you're saying. Maybe at two hours I would just give a time check and then at that point y'all can decide whether to or not.

Yeah. We have to make a decision on continuing or not.

And I think that's that's how Robert's rules work, right? That you would you need to vote um on whether to extend the time or not. Isn't that how Robert's rules work?

We don't ever adopt an ending time.

Yeah. If you adopted

Ah, okay.

Our our scheduling has a beginning time.

Okay,

everybody. You okay with that? Are you

And we'll try it for the next one in July. I mean in June, right?

Yes.

Yes. The one in June. And then we'll go from there. So see if it how it works out. Okay. Um All right. Next is Dvali dancing discussion. So currently um staff is holding space on Tuesdays at 5:30 for July and August starting on July 7th. Um, we're work we would work with the Kerry Senior Center to accommodate schedules starting in September. I know there was some discussion about if we wanted to stay with Tuesdays. So, these haven't been added to the your calendar um yet just because we need to land on what day you would like to have this um practice.

So, what do you need from us? Um, just maybe I don't think it has to be a motion because it feels more informal, but just agreeing which day you would like to practice.

As long as they know that one Tuesday a

month for sure, the majority of us would miss.

That's right. Me, too.

And that would be y'all letting Dvali know, right? Okay. [snorts]

Because we have meetings every other night, don't we? I do. [laughter]

I every other night. Yeah, I pretty much Monday, Wednesday, Thursday.

So, we're good with Tuesdays. I stay with Tuesday. I don't have a

Okay. All right.

All right. We'll bring uh Stacy, assistant manager Stacy Ti up to lead us through a budget discussion, but to give a couple of comments to um open it up and she's going to walk through this, but um I think you all should um be incredibly proud of the work that you've done and I'm incredibly proud proud of the staff that has put work into the budget this year. And as she goes through the milestones um tonight, which I asked her to kind of do um obviously as a new council, I believe y'all done more work on the budget this year and it um than you probably ever have and I know two of you um most certainly. Um I realize there's some in the public that wish it to be more and that's something that we can work on in the future, but I I definitely feel great about um how we've gotten to the point we have. And tonight we'll be kind of culminating the discussion with um a lot of your input from the last work session and and in the weeks uh since that uh with regards to where to make more uh revenue opportunities and more cuts. So Stacy will walk through that as well and I hope you have a great discussion and uh then with that we'll be able to make any adjustments that you talk about tonight and bring that to um June 25th for your for your vote on the budget. So, know a lot of other municipalities are taking their votes on the budget, so you're probably seeing what they're doing. Um, but just again to reiterate, thank you for all the work you've done to this point. We really appreciate it.

And turn it over to Stacy.

All right, that's great. Good evening. It's good to be back talking about the budget again. Uh, just laying laying out quickly what we're going to hit this

evening. Uh, we are going to talk about the work we've done today. I think it's important to uh celebrate the fact that we have all come together to do this work together over the past six months. Um, we're going to talk about the additional revenue cuts, items to consider, and fund balance choices that we've been covering in the last few work sessions and in regular meetings with uh the manager. We're going to stop to think a little bit more about property tax rate thinking and we've done a little bit of that over the last couple of weeks as well. And then we'll cover some next steps. So, sound good? My favorite calendar. I just keep showing it to you all. You know, I normally, you know, speed through it pretty quickly, but I do want to take a minute to absorb the check marks on this page. We really began in January, and we're going to talk a little bit more about this a minute when we talk about milestones, but that is the earliest we have engaged council in a budget process in my recent memory. Um, and that's remarkable. So, we have made it from January to May 14th with lots of things in between that we're going to cover. Um, and here we find ourselves on the second page of our chart with just three more dots to go. And today is one of those, right? Um, so we have this work session and then we have our second uh, budget public hearing at the council meeting in just a little bit and then we're set to adopt on the 25th and the new fiscal year begins on July 1. And I debated about whether we should have dots to show you when we're going to start working on 28. Like sooner than you think. [laughter] And then to add at one of those meetings, um, on the prior slide, y'all all got your three- ring binders. Some are tonight. Many y'all brought them to, uh, our meetings, you brought them to these meetings, you brought them to council meetings, and you got them empty, and now I can look around and see how full they are. Um, so we've given you a lot of detail. I see a lot of uh, flags and notes, and so again, just a highlight.

We need to do a better job with this thing. [laughter] I'm sorry.

We'll take input. We're gonna try to not do such a large do a book next year, but it definitely proves the point this year. [laughter]

All right. So, um Russ did talk with me earlier this week about he really wanted

it's important to him. I'm going to say that on your behalf, Russ, to share some of these notable moments and milestones that we've had since January because there are some great best practice work that we have been doing and it's important that we all acknowledge that together. Um, so I'm just going to run through a few of these bullet points and I just ask that you kind of reflect on, you know, your work and your part in all of that because we truly have done it together and that's to the greater room and to the public that's at home. So we conducted a budget prioritization exercise with council in January at the staff retreat that was really kind of one of our or in February January. February I don't know it's all running together. Maybe it's February. um at the council staff retreat in January. Liam came to you all and showed you a budget document and talked about important pages to look at. That was January. That's right.

Um we then focused uh held budget focused work sessions from January through June and those really picked up in the February March time frame and if you'll remember we started with capital and we started with active capital before we ever even started thinking about what new projects might be coming toward us. We prepared budget preview packets and that's a best practice from long ago that you know was important to us that we bring back and share with you all um that walked you through operating information and just helped you understand trends and background of revenues and expense types and on the capital side it showed trends and um you know projects we funded over the years and projects potentially coming at us in this budget process. Um, we prepared and shared budget public input in input reports with council at every budget work session and you have another packet in front of you this evening. Right? So, we're trying to make sure we're getting that input to you progressively throughout this process. We held the first ever budget openhouse, right? That was a big accomplishment. In April, um we gave budget presentations to the boards and commissions for the second year this year focused on prioritization and the exercise that you all did, our boards and commissions did as well. Perhaps my favorite is that we

returned to collaborative development of a director recommended budget that was then submitted to the manager for his review before the manager then put his thoughts and work into that and turned it into you all as his recommendation. um that foundation of bringing all the directors together, them working with their teams, us working together as a team, it's an important part of the process and we definitely missed that and it was nice to bring it back.

How long's it been since you you worked together on the director recommended items for the budget?

I'd say 21 or 22 was probably the last time. It's been several years,

but I'd guess about 2021 or 2022 in there. Um, another big one that I mean I love them all, but this one is also really meaningful because the recommended budget that was presented to you by Russ, it is in alignment, clear alignment with the priorities that you all discussed in January. It was truly council influence, right? Um, and that isn't always the way that's come up through the system in the last few years. So, that was that was nice to see as well. Um, we've discussed budget development items, I think, lots of different ways with you all every week pretty much from May to June, right? So, we've been talking with you monthly January through April and then you got the recommended budget in May at the quarterly and now we pretty much talk weekly, right? Um, I think the way those conversations have been held and you all would know, most of you would know um that far better than I, right? But it's been nice to to see that happen. Um, and then the fact that we're doing what we're doing right now, all the work that we have done has been livereamed, right? All of the work sessions, the quarterlies, and the retreat. I think that's that's an important piece of this, too, because it's making sure that our residents see the work and the thinking and have an opportunity to then provide the feedback that you all are getting through these input reports and other other areas. So, just I appreciate you uh giving Russ and I a moment to

just put that back in front of you, but would love to take a minute and see if you all have any reflections or thoughts based on on just some of these steps we've put before you this year.

And if not, that's okay.

I appreciate um all the extra work staff has gone into. This is a absolutely um jump from of information given to us, explained to us from past years. And in some respects when you give us a lot of data, we will all consume it and then ask you more questions, right? Which I know I did. Um but I also recognize that I think our our residents also got more information than they've ever gotten before. And I think that's good, too. And I think the budget open house, although it wasn't really well attended, a lot of people did stream the presentation afterwards and I think that was really helpful too.

At the same point, I think we can do more in the future, but I think I'm not uh dead fishing anything. I'm actually looking at what was accomplished and how well we did. And I think it gives us lots of opportunities to do even a better job moving forward. And I really appreciate all the extra work. And it's not just the staff that's in here. It's all of the departments that came to the budget open house and shared their love of Carrie. That's what I heard so much at the budget open house. So I wanted to thank you all, but then also thank all of your teams because that was really a big leap from what we've ever done before.

Absolutely.

I'll share one reflection. I I got to say I got more emails about the budget this year I think than ever before. I don't know if anybody else felt like that and they but they weren't um you know broad opinions. They were questions with oftentimes a fair amount of specificity

and this is the most number of questions

I was able to ask without bouncing to staff.

Uh I think that's a reflection of just how much information we were provided. And I found the budget format much easier too, especially since I recently went through our budgets from 2020 forward. Um, sort of looking at trends in the the whole budget amount, the capital amount, the operations amount. And each one the format, you know, was similar but not exactly the same. And I think after looking at each of those budget documents at least briefly, control F, I'll be honest. Um, looking at the digital copies, uh, there's, I think, uh, a lot of progress as far as how the information is is prepared. I wouldn't be surprised if it keeps getting better.

Great.

All right. Well, it's great that we've done all this awesome stuff, but we're not done yet, right?

So, we're going to work a little more. Um, we've talked a lot in the last few weeks about um, additional revenue that we could generate, some more cuts that or reductions, cuts andor reductions that we could make, and maybe a few items that we might add in. I know we've talked with you all some about that this week and wanted to have a conversation here as well. So, this is just a very highlevel overview of the thinking on how do we just kind of finalize and put a bow potentially in our thinking on this budget. So, when we've talked about additional revenue that could potentially be added, we focused right now in the near term on three areas. That's uh electric uh vehicle charging fees, an additional 2% increase to parks and wreck fees above what was recommended, and then that same additional increase to recommended building permit fees. Combined that would generate we're estimating about $527,000 of new revenue. And these things we as we've discussed before would be effective on July one at the beginning of the fiscal year. So, when we're thinking about how we've tried to make a little room in this budget to maybe accomplish a few other things, you all worked very diligently at reviewing some potential cuts. Um, we again talked about some that are more

longer term that we'll bring back to you over the course of the next fiscal year. But from this near-term option list, it seems like we're getting some cohesion around this group of items, which is reducing that available for mid-year funding. Um, removing the website overhaul this year. um making some reductions to Chamber of Commerce festivals and contracted videos. Um and then holding at least for some amount of time the renovation of the existing uh 911 center. When you combine all of those things together, those cuts would then make about another $2.1 million available. So, we've talked about additions, we've talked about cuts, right? Or cuts and reductions. We've also talked about some things that could potentially be added. There's still some things out there that you all brought forward that were important to you and and some from staff as well. So, this this list reflects that mix of council and staff initiated items. Those additions that have been discussed come to about 1.7 1.687 million. Um the first piece of that would be the remaining funding needed to bring that housing funding commitment to the equivalent of a penny, which is about 5.3 million. we needed a little bit more to get to that and we discussed that when you all made the initial uh thinking on that. Uh there's some funding uh that we've been able to accommodate within the police budget for a contract with an organization called Safe Child that our police department utilizes um when dealing with uh children that are victims of uh

abuse.

Abuse. I was like trying to pick the right word. Thank you.

Just abuse. Um, and then we've also incorporated some additional funding for our public works and our fire departments to deal with some personnel costs there that we want to make sure are addressed in the coming year. So, those together wrap up to about almost 1.7 million in what would be expenditure ads. So, we've returned some money, we've made some money, we've added some money, and we've talked about fund balance. And then this is the last piece of this math picture, right? So, um,

we've discussed together as a group that we have about $10 million above our current fund balance policy. So, we've got the mandatory amount and there's 10 million above that we can apply to something onetime use. Um, [snorts] the 2027 recommended budget that was delivered to you assumes the use of 5.7 million of that 10. And we've come to this thought that perhaps we could utilize the remaining 43 which would get us to that 10 um to fund some one-time part of the one-time capital in the budget.

Again, this would be used for capital one-time purchases only. And doing that would allow us to take a little pressure off of the tax rate. Instead of relying on general fund tax rate to fund some of those projects, it's now relying on that little bit of fund balance to make that happen. So, that's the third piece of this. how do we kind of finish this budget off maybe and and and accommodate some more needs but also revisit revenue and expenditures. So with all of that, if we do all of those things, the math works out to generating $5.28 million and that $5,288,500 is the exact number of a penny. We round up and say 53. So if we did all of those things, we could accomplish those few things that we added and we could potentially consider reducing the recommended tax rate by one penny from the recommended 37.75 cents to what I've noted here is a potential rate of 36.75. So this is really a discussion or thinking point for this evening on tax rate. I can go back if you sorry I didn't want to

you good. Okay, I can go back. So, wanted to bring this back to our residents, right, to our taxpayers. And you've seen the graphic on my left, your left. Um, the 3.75 cents graphic before. I think we presented this maybe either

at the budget or in the tree, I can't remember. Must have been in the budget May 14th. Um, but if we think about our current tax rate, our current tax rate is 34 cents per $100 of assessed valuation. Remember that the median home value assessed value in carry is 650,000. The orange box shows you that if we had a 3.75cent tax increase to 37.75, the recommended amount, that would be an additional $243 per year for that homeowner or an additional $20 per month. If we do the things that we just talked about in the cuts and the additional revenue and the fund balance use, if we choose that option, you could potentially do the green box, a 2.75cent tax increase, making the new tax rate 36.75, which means an additional $179 per year or $15 per month for that $650,000 [snorts] household. And I'll sit here for a minute. I think this is a good spot for thinking and conversation.

So what is the percentage tax increase um at the 2.75 cents?

I believe it's eight

eight%. So coming down from 11 box on the left is that 11%.

That's correct.

Thank you.

Where are you? Sorry.

I have some thoughts but you probably have more slides. This

I'll this was kind of

you are you are used to me bringing many many slides. This is actually my last

give you time to discuss.

So the you want to go first?

Yeah. So I uh do [clears throat] you have questions though because I have a couple comments. I have a question. Go ahead.

So in one of the work sessions I think you mentioned Can you hear me?

Yes. I can. Um so in one of the work sessions you mentioned that um this year the assessment value for homes in Kerry

we have noticed a slight decline

for the tax base not necessarily homes but for the entire tax base. Yes. The entire assessed value of Kerry. Yes.

And she did give an example that her own home

as Susan helped give me an example of my home. [laughter]

A personal example. So could you can um there are a lot of people probably watching that.

Yes.

And this topic comes up time and again that you know

oh K is doing this but then you know the the assessment value is uh is uh going up and they're still getting more money like you know let's get the elephant in the room if you could please explain what you shared with us. I it's not the assessment value per se but it's the total tax rate that you mentioned

and the possible loophole.

Yes. I think that's where we're headed is the $200 million of lost total assessed value in carry this year. I think that's what you're referring to.

Yeah.

Yes. So, uh the information that Wake County has provided to us uh from the tax administrator, they are the group that assess all the value of property in Kerry, residential, commercial, and otherwise. The information that they provided to us indicated that Kerry K's assessed value in Wake County has decreased by about $200 million. And that decrease is predominantly um tied to this it's being known as a tax loophole. So while that's not my favorite phrase, that's what I'm going to go with. Um that currently exists and that the general assembly is reviewing which is associated with charitable housing where if an apartment complex because this is this is where this legislation focuses. If an apartment complex is owned by an LLC with multiple owners and just one owner in that complex owns just the tiniest fragment like 0.02% 02%. It's enough ownership to qualify that building, that property as a charitable property. And that means that the tax uh the ability to tax that property has been decreased by 75% or more. And that's what's causing the

majority of that $200 million loss is that loss and what's falling under the umbrella of charitable housing, which in reality truly isn't charitable housing. It's still for-profit housing with the most minuscule charitable aspect.

In this Blue Ridge loophole, there is general assembly bills, I'm sure somebody on staff knows, that are being advanced now.

Yeah, they're Yes, they're in the legislature. They have nothing is moved forward to be officially adopted, but they are

they're moving legislature forward to close that loophole. People seem fairly confident the legislature will do that, but we'll wait and see how this goes.

Don't we can't count the chickens before they're hatched. Right.

Right.

But it is a loss.

You have another question. Go ahead.

So [laughter] So um what about the um assessment value? Where do we see that going this year? Do you or uh is this year we should we expect like what what year do we get assessed? I believe the next one is 2027 for fiscal year 2028. So it would be as of January 1st 2027 property that is on the ground construction on the ground.

So we don't have to worry about that this year. This year the property values are not changing

and it's it stays what it is and the only change that we have is that the tax increase that we will be initiating and the wig county has also um I believe they have uh adopted a budget with two cents increase. Okay,

that is correct.

And I'll only add assuming and you might want to bring up another bill, but there's currently a moratorum on tax increases where there's a um reval year. Um so you don't know what you might get in a future reval year.

Yeah, there's several bills pending related to property tax. One uh there are several counties that are supposed to be revaluing property in the coming year and it would be a bill that would not allow them to do that. Um, and then there's also, of course, the bills for constitutional amendments to cap local government authority to raise property

taxes.

And to clarify for you, uh, further, Council Member Bonsaw, I believe I saw that Chattam County, I know that affects your district as well, recently, uh, approved their budget and I believe they do not have a tax increase in Chattam County.

Oh, that's wonderful. Good news. Thank you. Can I ask um just for illustrative purposes, what was the median carry home assessed value at this time last year? I know it's I I hear that number move. It waxes and waines a little bit.

Well, for assessed value, since we're only uh revaling every four years right now, that value essentially holds for that four-year period because it's off of the assessed, not appraised.

Yes. Okay. So, we're using

That's a great question,

but we're using the county assessed value for property taxes when we

That is correct. That is our number. The county provides us the data and then we can determine based on that what the median is.

Of course. Thank you. I appreciate that. So for the total assessed value to decrease, there has to be it's not a broad um change. What we're seeing exact is exactly what council member Bonsol was asking about. It's that that adjustment upward or downward. Uh, is there any other levers that would change between revaluations? Is there any other lever that would change the total assessed value for tax purposes in Kerry?

Not other than appeals, which there is a period every year. I can't remember the cut off for Wake County, but it might might be in January or February. Um, but there is annually a period where people can file an appeal. But at this point, so far into that four-year period, the appeal numbers, new ones coming in are relatively small. They're still kind of working off their list from prior.

So, probably the year of the revaluation, there's absolutely significantly more than later. Okay.

Absolutely.

Thank you. Um, I'm not going to throw a wrench, but um, I am going to bring up some topics that I've brought up in our 3x4s, but I think it's fair to say it at the table so that um, you know, many residents

aren't aren't in our 3x4s, so they don't get to hear our relative [clears throat] discussions. Um I think one of the great things about having this discussion and um being able to come from 11% which was the original proposal to 8% is it gets us closer to smoothing as which is talking which is what um our interim manager talks about in the transmitt letter which is what we want to do and I think that is absolutely what we should be aiming for because smoothing matters. It gives predictability to all of us. Um, especially in a time right now where costs are going up. It helps families plan, especially if you have PMI on your mortgage, right? And then the, you know, you're paying your your taxes out of that PMI and then you come to the end of the year and you don't have enough money, you know, and you're scrambling for it. And obviously in public finance uh smoothing is the idea of let not letting tax rates jump up and down which we had that experience before. And so if we have the steady predictable path like using fund balance to help reduce the uh tax rate and absorbing the bumps then that's a good thing. Um the original proposal was an 11% increase which is was a big bump from the previous year which was 4.6 right so it was that's a big bump for a for a lot of people going from 4.6 that's more than double that's not smoothing and this council did an great job and staff did a great job bringing that down and helping us find the 5.4 4 million, shaving a penny off of the tax rate. That gets us closer. We're now at eight. But I don't think eight is smoothing either. This is my personal opinion. I brought it up and and so I just want to say it out loud. I think smoothing is there's no definition. [laughter]

Smoothing is relative.

There kind of is.

Well, there's no let's say there's no legal definition there, but I think of smoothing as 5 to 7%. Right. I mean, and we can, one of the things I was thinking about and I brought up in our in our 3x4 is we could get to five to 7%. We could get to six% by using a half a penny of fund balance, 2.7 million, which would bring the rate down to 3625. Um, now I understand that people are cautious about that, about using that fund balance. Um, I tend to be one of maybe not as conservative as the mayor, but I tend to be one of the more conservative voices now. Um, and I am cautious about that, too. But in this case, I feel comfortable about it. And I'll give you three reasons. First, our sales tax revenues are coming in stronger than expected at 1 to two million a month. It's 21% of our our our um revenue. Um, inflation's part of that because when you're paying more for your soda or your lasagna, your tax rate, right, the the sales tax is higher. Um, and people may stop buying sometime soon. But right now, I expect, and [snorts] I think staff is seeing it, that we'll have a higher sales tax collection. So, that gives us more of a cushion. Um, which likely means we'll replenish fund balance. Um, second, this council has already expressed interest in reducing the fund balance policy of 33 and a3%. Um, we've noted that it's higher than many communities. I think Raleigh has 14% and it's on our list to talk about soon, not right now, but soon. If we ultimately do adjust that policy, that would free up additional flexibility. And then finally, we have a lot of other factors working in our favor. We have all these new potential revenue opportunities staff is looking at. We

have changes that are under discussion. We have a town manager position that's been empty and we know the re the uh amount of money we're saving there. Um we also have the possibility of uh changing the retirement health care benefit um for new employees that might come on board later. And some of our most um likely public service public servants that will come on are ones that tend to um will be using that retirement benefit which is 100% of healthcare which could also have significant positive fund balance changes. So taken together all of these factors for me make me comfortable using a limited amount of our fund balance to ease the impact on residents. It it aligns with our goals of smoothing. It supports our community who are having a time of incredibly rising costs. It still keeps to our fund balance policy. And so for me, I would I would like us to consider that. I know it's not on um on the agenda per se, per per se. It's not one of the proposed items, but for me, it would be an opportunity to reduce it, get us to 6.5 or 6.5 6%, be more aligned with smoothing and prepare us for the future.

I 100% agree with you. That's exactly what I told uh Russ as well. I I couldn't attend um 3x4 last week because I was not feeling well. I had multiple things going on. But Russ and I spoke on the phone and I asked him to find two pennies. Um because of in this

Yeah, this isn't two penny. This is a half a penny.

No, I understand. But I'm just kind of sharing what my conversation was. Um so I asked them to find two pennies. um

only because I felt on in the spirit of you know going back to the same discussion we had uh during quarterly meeting where we all agreed to rate smoothing and I feel like that that was the whole viewpoint. I didn't really share too much detail on how to find that but I agree with you that I although I'm very conservative and I do not like to touch the fund balance but since we have already identified and we all agree that there is some wiggle room in the fund bal fund balance uh policy and we can renegotiate that in future. might as well use that to cut some of the um recommendation recommended balance right tax increase right now. So I'm 100% on board with that. I agree.

How much additional was that again?

2.7 million is a right. It's 5 point 2.75.

So can I give a rebuttal?

Sorry, I was she just asked me. So

So 2 3 point Let me go back 3.75. We have a three-year plan to bring up public safety, fire and police where it should be. And so you found money out of savings to go to 275. Rate smoothing tells me we should be 375 three years in a row. Now we put pressure. We're pushing the pressure on to next year with taking fund balance instead of smoothing per year. That's how I'm looking at it. to next year. I see the pressure of doing 4.75 instead of 3.75 and rating the fund balance. And it's only going to get more and more difficult. We're not funding road maintenance the way we should. We're doing about half of what we should be doing on sidewalks. I don't see how we meet the goals that this council set with public safety and infrastructure

by keeping by continuing to cut and rating the fund balance. I love the thought that we're going to go in a big discussion about what our policy should be and I totally agree with that. It should be less than 33%. But this budget is not the time to do that. We need an in-depth discussion. But mayor, we have lot of property that Kerry owns and we are in the business of property management. Um Russ and I also spoke about this that for next year. We didn't have enough time this year, but for next year, we should consider that looking at that property and sell the properties that are of no interest to Carrie and fund those kind of things where you're saying like and I believe um Dana kind of mentioned this to me that we can only fund the capital projects. We cannot apply those that funding to operation use. So, we should be a little bit more creative next year. We will have some time

next year absolutely. But this year I mean I think um we cannot increase in in anticipation that we we're not cutting any projects here. We are taking some money from fund balance which we anticipate that is we're going to change the policy and bring going to bring the policy down anyway.

Understand we need two fire stations, 89 police officers, fire trucks, uh fire uh firefighters. That's a huge amount of money and we're reducing our tax rate which limits our ability as we go forward and we may have legislature that says nope can't do it next year. We're going to put a cap on you then we're really screwed. Uh so I really worry about cutting this tax rate even further.

But by the way

if we're going to it's all about values. Now if our values are not about public safety and about infrastructure fine we can

we also rated affordability high.

Affordability. Sure.

But just just to speak to your comment of basically 3.75 cents every year, that

is not smoothing. Smoothing is a percentage having the same amount. I'm just there is a difference. So when you're at um

I just want I disagree. I disagree as well. This is why I I argued with you about what that what smoothing means.

It's a percent. It's a percentage. It's not a

It is not. It is a projection. It's how much money do we need over the next 3 to 5 years and then setting a tax rate appropriate to fund those things

from a percentage. Right? If you're doing not a percentage paying trash fee every year, right? Your trash is $20 and you're going up $2, the next year it's $22 or even say that's $10, it's 30. The next year you go up 10, it's 40. That is not this. That is not smoothing. Smoothing is a certain percentage. It's math, right?

You're you're stuck on percentage.

It is a consistent percentage. That's what PMI looks at.

Yeah.

Mortgages look at, right? You take a certain percentage of your mortgage and you put it aside based on how much you're paying for your taxes. And your taxes are asso associated with a number that is a percentage, right? It's 365 times your house cost. It is a percentage. So I yes, I'm looking at the number. It it's really not that big of a difference when we're talking a half a penny or a penny, right? But it does it does talk to how people are feeling about their taxes, right? And if you tell them it's going up $2 and it's going up the next year $2 and it's going up the next year $2. Yeah, I get it. That's right. But it is not the same every year. The impact to them is not the same.

Sure. You're talking about predictability. I'm talking about predictability and last year the predictability was 4.6%.

And this year we're double that.

But we have not done projections. We don't know our financial or fiscal needs for the next 3 to 5 years. We have no

way to smooth right now. It's not possible until we have that

say we're smoothing and and we're not. You're the only one saying we transform. I'll own that.

No, even I'm saying that council member Con Johnson because that's something we agreed during quarterly meeting

that that's a goal. Of course.

Yeah. Let me own the concept of it because I introduced it in where we want to get to. Um the mayor said it well with regards to public safety and other things where you know more positions are needed and things are needed. So to start thinking about the budget in a 2 three year window um we'll alone we we've um hedged on where we think our needs are going to be but that's where we want to be um a little further along in next year to be able to um better define it even because you you all haven't had a discussion of how you define it. We as staff may uh kind of define it with regards to our um utility rate model more is where we've done more work on that. So, somewhere in between where y'all are talking, but we probably could define it for you purposefully um in in the coming year. And that doesn't need to be with the budget process specifically. We've got time to work on that. And we need to talk about what we all think is the right percentage, right, associated with an increase because I think that's the only one like progressive taxes or taxes that we can talk about because as it hits someone with a $650,000 house, you know, it it likely hits someone with a $300,000 house much harder,

of course.

Right. So, what is what does that look like? it is it a 8% increase every year? Then we should say that that's what it's going to be. But last year it wasn't and we need to talk about what that expectation is and agree as a council what we what we expect for the next three years.

Yeah. I I think we have a semantic issue because I think smoothing means something very specific to you and I

think Carissa you and I I think maybe had more of a colloquial understanding of what smoothing might mean. I think I thought of it in a similar way which was incremental and predictable and I didn't have that notion pegged to a percentage or a specific percentage the way uh Mayor Prom Bush did. And so to me, you know, if we use a different word, if we say predictable or we say incremental, incremental is subjective. And you and I had this conversation in our 3x4 that I found even the 3.75 cents to me that was incremental. Very subjective, but that was incremental. And to me 3.75 or 2.75 yearover-year is predictable. Now whether those words mean the same thing as smoothing, maybe not. And so maybe we have to capture again our objectives. if smoothing means something very technical and specific or if we have a more um uh uh familiar understanding of what incremental and predictable means. Um because that's that was my objective is um you know I've shared before that as a candidate when I was talking about taxes with voters. I said I wanted tax increases knowing that we were going to face really tough budget decisions. And so I wanted to be really transparent when I talk to constituents and say this this seat I'm sitting in now and this decision we're making here in two weeks was going to be one of the toughest decisions council would have to make as a body that if I were to be a council member that I would have to make and that I recognized that some tax increase was going to be necessary to maintain our public safety to maintain our quality of life but I wanted that tax increase to be reliable. able. Um, and for me that meant predictable and so the

same rate year-over-year could meet that objective. Um, and I wanted it to be reasonable. I wanted it to be an amount that I felt most households could manage in a year. And that predictability would also help with that household budgeting. And so for me, 2.75 here meets those objectives. Um, but I share your concerns, mayor, where if we are looking at getting more predictable year after year, and we're making adjustments this year that we might only be able to make this year and might be unique to this year with the objective of getting the increase down, which is a noble goal. But if we're trying to think about these longer time horizons to build in that predictability and we don't know if we're going to be able to accomplish the same thing next year, it feels like we're introducing more unpredictability by whittling it down to the bone this year, not knowing what we might have to do in future years. and that some cushion there for that that predictability might be wise.

And my my concern and then my last comment because I I can feel I'm on the minority. My concern is that the last year's tax rate was one and a half was a penny and a half and this year's proposal was 3.75. So it's more than double, right? And even at 2.75, we're close to more than double. So from a predictability perspective, right, incremental increase to me is not almost double, right? So I I get it. I I hear you all and I understand the concern and I do I I am absolutely

hopeful that all of this extra money that I'm talking about from revenue, from fund balance, from um all the other opportunities are there that will allow uh allow us to do some of the capital things that I think we want to do, but it doesn't help the property tax, right? and and I still think we're going to end up fine, but I I am concerned about more, you know, close to doubling, you know, that tax rate is not an increase.

We're not doubling the tax rate.

Sorry. Doubling the amount.

You're keep saying that. I just want to make sure that doesn't end up quoted on [laughter] the internet. more um but but more than uh doubling the increase from last year, right, which was a penny and a half and um originally 3.75 cents, but now um and I'm thrilled at 2.75. I'm not looking at gift horse in the mouth. Everybody worked incredibly hard and I still think that there's absolutely room to do that and still when the extra money comes in, we can do the additional capital. I am not taking money. I don't want people to see this and think, "Oh, you know, she's suggesting less property tax rate, so we're less safe because we're going to we're not going to get uh police." That is not the case. We fully funded police.

Yeah.

You're not taking fun this year.

It's a three-year plan.

I understand that, but we're not taking away for next year either.

Yeah, that's not what I'm talking about.

I do have some technical questions for Stacy and maybe Dana as well. Um because and I admitted this in my 3x4 of all the components of a complex budget, fund balance to me is still the most complicated. Um and so I felt I heard in our last conversation that we really only have the $10 million as real dollars.

That is correct. So, if we were to take any additional dollars, where does that come from? And does that risk on paper until we close out fiscal year 26 and those receipts are in and that year is finalized and we've got real money in the bank and we have a final figure. If we were to take more dollars from fund balance above and beyond the 10 million, which we we do know are real dollars. Those are real dollars that we have or accounted for.

If we were to go above and beyond that, where where are we taking that from? Do we risk then being on paper for some amount of time below 33%.

I can see Dana's got a thought and I want to make sure she gets to share that.

Dana was hoping you would ask that question. [laughter] Um so essentially you would be adopting a planned budget that is inconsistent with fund balance policy. Um I I would also like to highlight that um um council member Bush referenced Raleigh's 14% 14% in Raleigh is available fund balance. That is a different calculation than 33% of total. We do believe you should consider a revision that look to your fund balance policy that looks at available. I don't remember the numbers off of the top of my head, but I recall our available being around 18 or 19%. So in this particular year's example, it's entirely possible that the 10 million already being taken could be more than you would by dropping your available portion down to something that is comparable to Raleigh. Which is why

it I think it would be important to get into the discussions about fund balance to be able to understand what what the numbers actually are. And then the final thing I would say is that um so in addition to fund B balance considerations, it is best practices um as uh council member Bonszel said to only use um fund balance or for instance if we sold property for one-time purposes. So, so if we were to go further with fund balance, we would want to um do further calculations to make sure that that was not actually paying for operations. Um because you would really technically want to cut operations more um in order to be consistent with best practices because if your operations are one thing this year and you're funding it with a one-time um item, that means that you're setting yourselves up for a problem next year.

And just to do a time check, it is 557. What is the uh property [clears throat] property tax uh revenue uh the percentage of the whole of our budget? Is is it 60%?

It's about 60%. Yes,

it is.

Okay.

I just want to share that I was writing down almost exactly what you were saying, Mr. Mayor, when you were saying it. Um, I think one of the challenges, especially this time of year with the emails and the social media, I think it's very challenging to try to remove emotion to a certain extent from the these hard number activities. Um, I desperately want to reduce the tax rate. I that would make me feel fantastic, but I also desperately don't ever h want to have to explain to people in District C why they have a 15-minute response time when they call 911.

So, let me finish. I let I let you finish. So, I think that is from a smoothing perspective when we know we have investments we need to make year over year over year because we have we call let's call them SLAs's, right? That's what we call them in software. We have SLAs to deliver. Those SLAs's a lot of times aren't necessarily what we know them to be or what we speak them to be. It's what our residents expect them to be and they do expect premium service especially in in matters of life and death as council member Craig has called it. And so I feel as though when you say values Mr. Mayor what I hear in my head is values but what I hear is expectations and status quo. Right? So that's I think those things are valued. If we do anything in the spirit of really not wanting to stress people's pocketbooks any worse than they are right now, if but if we do things that down the road if we kick the can and we create a situation where our residents are like, "What the hell did you do to Carrie?" I think that would be allowing emotions to dictate how we're looking at these hard numbers, not values. Values are a lot different than the pressure. There's I don't enjoy getting emails telling me I'm ruining people's lives. I don't like the idea of people on fixed incomes being like, "Oh crap, I could barely afford my taxes." As it is that I don't take any pleasure in that, but there's also this really significant balance that we need to like it's like walking a tight rope. Um, and and when we talk about potential, you you Lori, you've always had really great ideas about pla places where we maybe could find some revenue or we could diversify uh, you know, where we're getting money, but we can't bank on things we've never even discussed. For me, it makes me literally cringe when we talk about doing these things because I'm like, well, wait a minute. What happens if we change the fund balance policy? Well, what wait, how can we spend that money? And same thing with like talking about tinkering around maybe with with benefits for new employees, not existing employees. Um, but if we've never even had a slightest

conversation about that, so I don't know anything about that. I don't know about what properties we could sell. Like I feel like that was a conversation for us to have in February

if we wanted to do those things. And this year we were I think we would have had them this year if we didn't have all those challenges to deal with because

at least all but maybe one of those things you've brought up last year and sometimes the year before and the year before and I feel like we were on a path to discuss those things with the new council and then we you know things got derailed. I think all of these things are potential changes we could make for fiscal year next year. I'd love to see us in July have a work session about, okay, in what order do you want to talk about these items that we

didn't get a chance to consider for this year. So, I think that the mayor is is is accurate that we don't want to jeopardize what we know to be the right things to move forward with what we know is the projected deeds for the next several years. But simultaneously, you're not wrong. Those are things that we should consider. um if we get those receipts this fall and there is a significant amount of money in there, there's a lot of discussions we could have there um about what to do with those funds uh but we don't run the risk of running a foul of our own policy and a really well thought through plan and budget.

So I just want to be very clear that I'm not saying that we need to take money away from public safety or parks or this or that, right? Like that's not what my recommendation is. I didn't think it was.

Yeah. But taking the money away from fund balance to do that

rather than the tax rate.

That's what bothered me.

Fun balance isn't used for police and

Exactly.

Yeah.

So you would play a game. You'd go do capital so that money could be used for operations.

But we did do that here. We did use

Exactly. It just the question isn't how much we're willing to do but how much

how much of it and we don't know if we have because we already have said we're willing to do that

it's just how how much is our comfort right what is your comfort level that's really what it is

can we bring half a penny more is what the question is right now

it's probably safe to say that I am the biggest risk taker if not tied with somebody else on the council as far as as long as we are being transparent I am leaning toward pushing the limits to make it easier on our residents. And this does make me a little nervous because we're trying to make a decision in 10 minutes that I believe our what is in our best interest is to make a commitment to our residents that we don't start this in January that we start this at the end of July.

August. [laughter]

August.

August. Um Stephanie

and because I mean I know we all have a long list of things that we know we can make this better for next year but we don't want to I don't remember who said it. We don't want to put too much of just emotion into our decision making when we haven't really thought through what the pros and cons could be. Um, the reason I I had a convers I've had multiple conversations of people cautioning me about fund balance and the reason I I know we should not rely on fund balance and but using it to keep the tax rate of increasing the reason that I feel that that is okay and I'm not advocating exactly how much but it's because I know

from all the conversations that we've had that this council is committed to continuing to look for additional revenue opportunities for additional ways to make cuts that are not crit I mean not cuts to critical things but like we're getting down to the wire

and but but I know we're committed to this being even better next year and the whole idea of rate smoothing just quickly maybe it it's semantics but For me, the initial step for smoothing or more predictable or whatever we choose to call it, going from an 8 cent increase to a 1 and a half cent increase, I think we can say is definitely not predictable or smoothing or whatever we want to call it. So looking at what we have the options here definitely is a step in the right direction and whether that's a certain percentage yearbyear. I personally don't see us coming to terms with that in the [clears throat] next two weeks because I know we can't decide that the night before

um that we need to decide that

probably make a request to find half a penny

if we can

I think it's pro I'll just say I think it's probably too late to ask and I I want to be clear because we had the conversation It's too late to find a half a penny. That was why my proposal

Yeah.

Yeah. That's why my proposal was, hey, can we get a half a penny from fund balance, right? We our last quarterly report said, hey, you're going to be about $29 million based on projections over your fund balance target. Right? Said fund balance target was 90 uh 33 and a3% was 96 million. projection is

125 million.

Is the projection a little bit lower now?

And maybe

it is yes

and it's not all usable

and right I'm just I'm just saying so I that's where

I do the you know that's why that came in or or

like I said I wasn't going to say anything more but that's why I thought you know what I'm not going to ask to find a half a penny I'm going to ask to find to use a half a penny from fund bounce. If it works that's great. If it if everybody's on board, that's great. If it doesn't, that's what a council is about, right? Us voting one way or the other. Um and and just to one of the things I was saying this week is we do a lot of talking, but we don't uh take a vote. And that's been the hard thing about sitting at this council is I don't think staff really recognizes where we're headed with something because we often don't take a vote. um we just talk about something and then we give it to them and say, "Hey, good luck with this." So, you know, my motion may may um pass or fail, but I'd rather us move on understanding that it's almost time for the meeting. So, I'll make a motion um that we uh use a half a penny from fund balance to help bring this um down to 6.6% or uh 2.25 cents. Is there

discussion?

I'd prefer you consider something less than half a penny.

I need somebody to remind me how many millions that is.

2.7 2.75.

So, does that keep us under 10

or right at 10?

So, this the 2.75 is already not talking about cents. I want to know

I didn't take a picture of that slide of the 10 million

of the 10 million. Let me go back here and see

the impact on 33%.

You want me to come back here? So these two things are using that 10.

So anything beyond that would be above the 10.

Correct?

Cuz I I just want to I don't know where we are now in our motion. Are we

discussion? Perfect. Because I'm discussing uh you know we've talked so much here and I might not have made it clear when I was talking about how I feel about fund balance that if we do want to advance those couple of slides again. I am comfortable using all 10 million to get us to 2.75 cuz I agree with you, Council Member Con Johnson, we do not relish having to ask our residents to pay more

that we're asking something very hard of them and of ourselves. Uh those of us on council who are homeowners as well, right? We we are also contributing. um a asking we don't take that decision lightly. Um and we are trying to walk that tight rope and and we've had this discussion before of how high it could be, right? You know, I mean, I could have gotten up on my podium again about Lewis Stevens sidewalk and said, I want you to add another three cents to this. I'd like you to make it 6.75 because I really want that sidewalk. And those tough decisions are reflected here in trying to get it down, like I said again, as reasonable and reliable as possible. And so 2.75, I'm really glad we found another penny and we have real dollars to get us there. So I am comfortable using all 10 million, an additional 4.3 to 2.75. Beyond that, I get a little nervous.

Yeah. To your point, we reduced the total amount of the budget enough to reduce the tax rate increase by a penny. Not we found money, which is what you're proposing, additional money to pull in to offset the the budget. Yeah. So,

and just to be clear, it's not just about people who own homes,

right? All of the apartment buildings pay a property tax. So that means that every renter will feel an increase to their rent because that apartment building is going to have to pay more property tax. So it's not just

I don't want us to just think about the homeowners. It's about everyone and and I just threw it out there so that we could move on. Mhm.

So my question is if we if we decided to use a fund balance for another um half a penny,

do we have the cash in the fund balance but still meet

that goes back to the slide right here. I'm still confused about this is the 10 million that we have that we know we have available. We know we have it. And these two numbers added together, the 57 that's already in the recommended budget plus this rounded up 43 we're talking about today uses that whole 10 million

which is the 10 million from your ACER. Yes.

From the audit, correct?

Uh from well earlier this year, which is the practice by which we've spent fund balance,

but the slide's confusing because it says the remaining 4.3 as if there's another 4.3. really referring back to this one because this is in the budget.3

we can use 33%.

Mhm.

Yeah. What we're talking about today to get you to the 2.75 cents

uses this 4.3.

So Bella, this is above 33% that what we have and which is available for use.

But we need another we need 2.75 for half a penny.

More than all of more than all that more than all of that. So where is that cash from? That's for Dan 33%.

So that's break the

We don't have any more money in the bank.

That's D's. Do you have money?

We do have money.

Well, we don't have any more additional above policy cash in our fund balance. No, not right now. But we expect there to be in the in the early fall.

We expect there to

past 10 years public safety issue we need to solve in this year or in three years. actually should be 13 years issue and we are yeah challenging ourselves to solve all the problems in one year the next three years right cuz last for the

but it's been pushed back for five years

so now

can I just call the question

yes

because it's 62 and

I mean you're you have an absolutely great point and we should talk about that but I think

that's already in the budget

yeah very good point we really should discuss that need to spend in our saving account and break the 33.3.

So, we have a motion on the floor. All in favor, please say I.

Or she said she was thinking about calling it.

What that means

after we have to vote and then

we or I can just call it.

You could just calling the question. Just take a vote. Take a vote.

Okay. All in favor, show a hand since it's not going to be unanimous. All in favor, please say I.

I.

Those opposed.

Motion fails. Five to two. We have any other business. We're out of time.

We do not

That's the next two steps.

And Russ,

no announcements.

Thanks for the motion. Feel free to make tonight.