Counselor Duggar.

Here.

Councilor Hart, Mayor Prigg here.

Counselor Kimmy.

Here.

Counselor Teeter.

Here.

Counselor Tivnon.

Here.

Mayor Beatty.

Here.

And I have the Councillor Hassanus absent tonight.

Correct.

All right.

Well, we have one gigantic agenda item for tonight.

I want to thank the city counselors for prioritizing this meeting.

As you know, it is the Lord's work to get the seven of us on a schedule that makes sense.

I know the city managers team had to go out, I think, five times with a doodle poll to make this happen.

So I know Councillor Kimmy is very tired, so we will get him some coffee.

So one upgrade is seltzer.

And I think tonight what we have ahead of us is the start of a really tough conversation of where we are with our finances.

We've been having versions of this conversation through four budgets.

Our first year we had, as many people know, we had ARPA funds that backfilled a lot of our cuts, so they were not as substantial as they are now.

It is structural for those that are watching.

Structural means that what we've been doing to patch the budget, which is save money here, do some stuff there, doesn't fix the long-term inequities that measure 5 and 50 created, in which our our revenue grows 3% a year, but our employees and their family and dignity grow much larger than that.

The council has made years of tough decisions to get here, and now we're at a point where there's not a lot of cutting left to be had.

The city manager and the assistant city manager are gonna go over tonight where we are as we discuss uh the financial recovery plan.

So I would encourage the council.

I've spent a lot of time looking at the budget, a lot of time looking at the framework to ask the questions that you have.

Our hope is that we don't we leave tonight on the same page and the same piece of understanding about the hard decisions that are ahead of us that we are equipped to talk to our community in a way.

I mean, I remember right before the last budget committee, KATU was outside interviewing random people walking by City Hall about what they thought about Beaverton's um budget situation.

And of course, with no context, everyone just simply says they need to manage their money better.

This is not a money management issue.

This is about a group of seven community members elected to represent their voice in the building to make hard choices.

What we have valued in my time as the mayor is our staff.

And uh as best as we can keeping up with inflations, and we've not been able to give the prey raises that we've wanted to.

We've had to make hard decisions about our PERS liability versus our street fund.

So I think this council has done a great job as the stewards of the funds in a system that was not designed to maintain what is happening to us right now.

So with that, great opening of uh doom and gloom.

I'm gonna hand it over to the city manager.

Well, thank you, Mayor.

Um, if we can get the slide deck up, I'll go over briefly uh what we'd like to achieve with tonight's discussion.

We can go to the next slide that'll show the agenda for this evening.

Uh so this is a follow-up from the 2526 budget process in which we um told the council that we would come back through a work session and really dive into our fiscal recovery and approaches to achieve fiscal sustainability for the long haul.

Uh Elizabeth and I are gonna be covering um a variety of content tonight.

Uh the four areas I think that are the most important to pay attention to is really the challenges to the general fund, understanding the fiscal sustainability plan that the council approved and where we're at on that and the accomplishments that we've made, and then where we need to go from there.

Um expense reductions and revenue generation options.

We want to know um what's in your toolbox uh that you can use moving forward, and then finally wrapping up with next steps in terms of where do we go from here.

There are three basic things that we want you to get out of tonight's conversation.

One is to understand the progress that we've made to date.

Uh the other is to understand again your options.

Those are really important uh for us to share with you and for you to provide feedback on.

Uh and that's really the third is that really to ask questions and unpack some of this with us so that you can kind of truly understand where we're at right now and what things look like on the horizon.

Uh, we will come back to you in October of this year based on what you provide us in terms of feedback, and we will have some additional information about um what truly next steps are in terms of spring and if we decide to have a conversation with the community.

So with that, I'm going to turn to Elizabeth to share a little bit about property tax and do some nets and bolts with you.

Good evening.

So I'm going to back up before we talk a little bit about the fiscal sustainability action plan and provide some context as to why it was needed in the first place.

And so if you can go to the next slide, please.

And so we're going to spend some time talking a little bit about property taxes because that really makes up about 54% of the revenue in our general fund.

And Oregon's property tax system is very complicated and limits the growth of the taxes that we receive.

And so we want to spend a little bit of time tonight going over kind of how our system works and what the impact is to our city into the services that we're able to deliver.

So this may be a refresher, a reminder to many of you, but it never hurts to hear a little bit of a refresher of our system.

And for any residents or staff who might be listening in, these may not be things that they're aware of.

And so you can see here on the screen, first off, that for every dollar of property taxes, the city of Beaverton receives 21 cents, and that funds services like our police services, library, community development, community engagement, and so on.

The other thing to really take away from this slide is that there are many other government jurisdictions within Beaverton that also receive a share of property tax dollars.

And you can see organizations like Washington County, the school district, Twelton Valley Fire and Rescue, Twelton Hills Parks and Rec, and so on.

And so that dollar is really divided between multiple government entities.

And so next slide, please.

And so Oregon's property tax system operates within constitutional limitations that voters approve through two measures, measures five and measures 50.

And together, those really limit and constrain the growth of property tax revenue.

And so we're going to go over briefly what each measure does, and then we'll go over some examples.

And so Measure 50, which was established in 1997, established permanent tax rates and then limited the value growth of those tax rates from then on after.

And so effectively what it did in 1997 is replaced existing tax rates with permanent tax rates that were lower than the ones that were already established.

So on average, it decreased tax rates by around 11%.

And then it changed how property taxes are levied.

And then in conjunction with that, measure five, which was passed in established in 1990, also limits the total taxes that can be collected for government services.

And so for general government services, which is not just the city of Beaverton, it's also some of those other entities that you saw on the screen on the slide right before this.

So THPRD, the county, et cetera.

Our limit is $10 per 1,000 of real market value.

And so that really sets up the idea around compression.

And so we'll talk more about that in a moment, but essentially the amount of taxes that you can collect can be lost to compression with the implementation of this measure.

And so you can think of it as a cut and a cap.

Taxes were cut and then they were capped.

Sometimes you I've been asked, why would we make these changes?

And so the goal at the time was really to provide predictable tax bills to residents and limit the growth of expenses to residents.

But the consequence we know is that it really restricts local government's ability to respond to inflation and growth and rising costs and provide critical public services.

Next slide, please.

So in the next couple slides, we're going to talk a little bit about the impact of measures 5 and 50 on the revenue that we collect through property taxes.

And so Oregon is a little bit unique in that it really breaks the link between property taxes and property values.

Oregon is the only state where the assessed values do not reset to the market value every time a property is sold, for example.

So there are other states that have property tax restrictions in place, but they would reset the assessed value to the market value when the house is sold.

We don't do that here in Oregon.

And so you really do see disparities in properties where that growth has been limited since 1997 and 1998.

So you can see on this slide the makeup of the properties in Beaverton.

And so residential properties make up about 59% of the city, followed by commercial and industrial at 21% and multifamily at 14%.

If any of you are doing the math, that will not equal 100% because we do have some exceptions for properties that are not subject to property taxes.

And so when we look at property taxes and residential properties, the assessed value on average is around 55% of the real market value.

And so that revenue is really not captured.

For multifamily, you can see that the assessed value is an even less percentage at 37%.

And then you can see an uptick for commercial and industrial where their assessed value really is more at the 65% range.

So it's not unlike our healthcare system where we might want to have different types of ratepayers into that system.

It's a similar setup here with property taxes.

So next slide, please.

Okay, property taxes in action.

We're going to walk through a couple of examples of Measure 50 and Measure 5 in action.

And so the first thing we're going to look at is the impact of measure 50.

And so this is an example based on an actual Beaverton house for sales.

So we went and looked at public listings.

And this, and we're going to talk a little bit about what the impact is of taxing on assessed value and not having that reset to real market value upon the sale of the house.

And its real market value that it's on the market for is $550,000.

So we have some animations on the slide.

We'll walk through those one by one.

So next click, please.

So the local government taxes in this hypothetical example, let's just say that it's around $12 per 1,000 assessed value.

And then next, what we would do is really calculate how the taxes are calculated.

And so if you go to the next animation, please.

There is an asterisk there, and we'll get to that in just a minute.

So let's think about next animation, please.

What if the AV was reset to the market value when the property sells?

Next, please.

So if we calculated taxes for this particular property based on real market value, then we would go $550,000 times the tax rate and get $6,600, which is $1,000, $1,080 increase.

And so that is an example of the type of revenue that we are not realizing when the link to real market value is broken.

Now there is an asterisk there because this does not take into account measure five, which does limit the taxes that we can collect due to compression.

And so for example, we'll walk through compression a little bit more in the coming slides, but the compression would be limited to $10 per thousand assessed value.

And so with compression in play, we wouldn't see that $1,080 increase in property taxes, even if we broke the link between real market value and assessed value.

So both measures work together, and both measures need to be addressed together to really see meaningful change to our property tax system.

And what's complicated is that either measure requires a constitutional amendment at the state level.

Next slide, please.

So speaking of compression, we'll talk a little bit about compression, which basically means that taxes are reduced if the general government limit of $10 per thousand real market value is exceeded.

And so property, the compression is calculated on a per property basis.

And local option levies are reduced first.

And then the permanent rate levies are, or excuse me, the permanent rates are reduced proportionally for each jurisdiction in the general government category.

The exception to this is taxes for general obligation bonds are not subject to compression.

And that impact really adds up to millions of revenue lost for cities statewide.

So don't be too alarmed by this figure.

Be written as not near this figure, but according to the League of Oregon cities, the compression impact is approximately $48.5 million for cities statewide.

That figure was as of fiscal year 23-24.

Here in Beaverton, right now we lose around $87,000 annually to compression.

So right now it's not a significant issue.

But I would say that Beaverton's tax rate in the general government category is $11.89 right now.

We have a lot of general government jurisdictions here in Beaverton, and we do have multiple potential levies coming up that will increase that rate.

Just to name a few.

Next, please.

So the first step is to figure out what are the general government limits for this property.

And so as you might remember, we are capped at $10 per $1,000 real market value.

And so next, if you do that math, you would multiply their real market value by that tax limit, and you'd come up with a tax limit for this particular property of $4,000.

Next, we will look at the local government taxes.

So for this example, the various government taxes equal $12 per $1,000 assessed value.

And if you look next, then if we do that math, the taxes for this particular property would be at $4,200.

But there is that $4,000 cap, and that means that $200 for this particular property is lost to compression.

So not too large of a number for this particular property, but it does add up, and the number does vary significantly property by property.

And so with that, I'm going to turn it over to Jenny to talk more about the fiscal sustainability action plan.

All right, well, thank you.

If we could move to the next slide, this chart will look familiar to you.

The city council took action back in 22-23 to explore various budget strategies.

So it's a mix of revenues and expenditure reductions.

So this is a slide of the overall plan.

I will go through this in a little bit higher detail and then report out on some of the progress that we've made.

And what we want to do is we want to start bringing back this action plan to you annually so that you can refine it with your unique changes as we learn more about the city's fiscal situation.

So if we can move to the next slide, we'll talk about the revenue enhancements.

And this table reflects three general fund strategies and one street fund strategy.

So we do have two different sources here.

So I'll walk through the general fund revenue strategies.

The first is adjusting the current property tax to the CAP.

And so as you recall, we had a remaining amount of about 40 cents.

However, that took effect in 2324 is when we implemented it, and it generated about 4.2 million dollars.

So a little shy of that, but again, um nonetheless very important.

The second item is a fee study, which as you know was implemented as a part of the current year budget.

And at that time, uh we estimated about 1 million dollars.

So we will know how much we'll actually be generating by the end of this fiscal year.

And I suspect it would probably not hit 1 million.

I think it will be less than that.

Uh but we'll revisit that once we go get those numbers.

And then the third was a future operating levy.

And at the time, again, this was back in 2223.

We estimated $3.3 million.

However, as you know, our expense world has changed quite a bit.

Uh as Elizabeth mentioned, we have drivers like uh contractual cost of living increases, we have PERS or retirement, which as you know is an increase that was pretty substantial, and then health care expenses as well.

So we expect this amount to be significantly higher than the $3.3 million, and we'll have a more accurate number later on this year to present to you.

But the good news is is when you look at this overall, you can see that we're about halfway to our goal.

And we've also identified the transportation utility fee, which as you know supports road main rate maintenance and capital street projects.

And this annual revenue was estimated to be $6.8 million.

And we've been working over the past year to refine that number.

As you know, we are bringing this item uh forward to you September uh 16th, and we're guessing that's gonna be between around $9 million to $10 million, and so we'll have a conversation about what is really needed to fund our streets for the tough fee.

So if we shift to the next slide, we want to talk about the action plan status for expenditure reductions, and these really focus on efficiencies, and there are several of them.

So I'll try to kind of roll it up as high as I can go for you.

Um we did a reduction in materials and supplies, uh and we were above target, about $2.5 million.

So we made some great movement there as you can see the projected savings at the time was a million dollars.

We also had some suggestions on outsourcing key items like repo graphics.

So we conducted an assessment there, and we found that really moving repo staff to communications was the better bet and keeping that service intact, but we incorporated the copy management support to our ITS department.

It didn't make operational sense to us to eliminate this service, so we're continuing to do that.

We conducted a number of organizational assessments and training across the organization.

These should sound familiar to you.

We've talked about them before.

We did a boards and commission assessment and HR assessment, and municipal court is actually in progress right now.

We've also established a cohort of staff to do process improvement throughout the organization, and these have been really critical, not to generate actual monetary savings, but really productivity enhancements on the day-to-day work that we do.

A great example would be uh we have participants that are testing out some of our AI tools, and we uh realized about an average of 1.5 hours per week of savings, and more in some cases it was more.

And so this doesn't allow us to cut an FTE, but rather allows us to build capacity because you'll see later on in our conversation.

We've done a number of reductions on our FTE count, which is uh full-time equivalent for those that are paying attention to the acronyms.

And then the last two will wrap up is uh the corporation yard services.

There was a discussion about how we could look at identifying opportunities to share those, and we found that that wasn't feasible, at least right now.

Uh and then we are doing a fleet study that's currently in process.

We're looking at staffing, procurement, and process improvement, but I would say that that again will probably not be monetary service or support savings, but more productivity.

But here's where we're going to talk about more of the personnel.

If we go to the next slide.

So these should also look familiar.

Um, I'll read them out loud so folks at home can hear.

So identify essential community development services and reduce enhance functions.

So this is in progress.

Uh CDD services were the ones that were reduced the most.

Many of these were vacant positions, and as you can see, uh there's a pretty large swing of savings.

We have about two million dollars in FTC FTE savings as a result of that.

Uh the second one is reduced community services and engagement programming.

We really looked at our program budgets.

They've been reduced to the extent that they can without significantly impacting the public.

And so many of the recommendations are related to efficiencies and structure.

A great example is moving emergency management to police, for example, and then we've continued to evaluate some of the efficiencies across structures in the departments.

Uh this the third one is reduced general fund FTEs.

And so this again is we're above target in reductions, and initial estimates of the 36 FTEs depended on the type of position and cost, which it makes it difficult to project those costs because everyone gets paid differently, so it depends on the position.

But the bottom line here on this chart to take away is that we are below the revenue targets because much of that work is in progress, and I think you know that.

The great news is that we've gone over a target for many of the expense reduction goals, and we've achieved about 95% of that.

So about that's $9 million out of the goal of 9.5.

So I think that's pretty significant work on the part of the council.

Next slide.

This is a really great visual of the FTE drop over time.

As you can see in fiscal year ending 22, we started with uh 380 general fund FTEs, and as you progress over time, we're now at 340.

So that's a pretty significant drop in our overall organization.

We are much leaner organization now, so we need to operate a lot differently.

Uh however, as you know, further reductions are going to impact service if we continue to drop below the 340.

The next slide is the general fund forecast.

This is very familiar.

This is the chart as of May 25.

We're fine-tuning the forecast right now, so you'll see this in the next couple of months.

And just for those that aren't familiar with what a forecast is, who are listening in, a forecast basically projects the revenues and expenditures, in this case over a five-year period.

And changes to fund balance are also reflected in the chart, and that's based on what the projections are and how much structural corrections that we're able to make.

So, what I want to do is start with the top two lines.

Uh the first one is the blue line, and that represents our revenue.

And the second is the orange line, and that's our expenditures.

So I'll walk you to through both of those.

Uh the expenditure line reflects projections for all of our revenue sources.

So that includes the property tax, which Elizabeth noted is 54% of our revenue pie.

The other half is comprised of things like fees, business licenses, permits, right-of-way fees.

So think cable, uh, gas, electricity, marijuana tax, uh, intergovernmental revenue, uh, grants, and interest income.

Those are just to name a few.

Uh property tax in particular is averaging over year over year 3.6, not very much.

So that's why that blue line is pretty flat.

Um, and you can also uh know that every other revenue fee or revenue uh is about 2% growth.

So all those ones that I just listed, absent of property tax, they're only growing at 2% a year.

So that's pretty significant.

The other is that we have some sources that are in decline.

So the marijuana tax, for instance, that one is on a decline.

So not all of them are performing in the way that we want to.

Uh we will later hear on the presentation of why not property all property taxes created equal.

And I think you got a little bit of a preview of that uh through Elizabeth's conversation.

We also have some assumptions in here on the Bureau under levy, which if you don't recall what that is, that means that if we don't feel like we need all of the tax increment that we collect for the urban renewal area, uh we can put that back towards the property tax.

And as you know, we built that in the current year budget.

So shifting to the expense line, that's that orange line.

Whoops, let's go back.

There we go.

Um we're not done yet.

Uh so the orange line is comprised of clearly all of our expenses, and that is in a an upward trajectory.

These include again things like contractually obligated agreements for employees, these are the COLAs, our PERS increases.

You're gonna see jumps in 20 year end, uh 208 and fiscal year 30.

And then health care, of course, those can continue to drive up.

Over 60% of our expenses, as you know, are personnel related, takes people to provide services.

And another assumption that's important is that all budgeted positions are assumed to be filled for the entire year.

And as you know, along the way, we have vacancies that occur.

But we do that for planning purposes.

Now the last two lines in the bottom, uh, the yellow is our target reserve.

This is kind of what we want our piggy bank to look like.

Uh, and then the other is our gray line, and that's our ending fund balance, or what happens if we decide to use reserves and we can't find a strike a balance between uh new revenue and expenditure reductions or introducing new service delivery models.

So a couple of things to know about the reserve, and I think there's some opportunities here.

Um so I want you to listen carefully.

So in 2018, the council adopted a formal policy, it's a formal uh reserve policy, and they establish two targets, uh, and it's a percentage of operations.

So the first target is 11% of expenditures uh for the proposed budget as presented to the budget committee.

So you start out with an 11% reserve target, then at towards the end of the fiscal year, you have a 17% reserve target.

That's 17% of expenditures put away.

And so we're looking at that and we're thinking there's some opportunity to have a conversation with the council where is that something where we want to continue to do that?

Is there an opportunity where we can explore additional reserve approaches that provide more flexible funding uh for the city, but at the same time meet GFOA best practices so that we're still within the norm.

And I think that there are.

So we're gonna present some options to you moving forward as a part of the budget development um process.

Okay, now we can go to the next slide.

All right, so these are just some key things.

I will oh I'm sorry, go ahead.

Thank you.

Um sorry, I realized should I do this?

Are we doing this for sure?

All right, thank you.

I had a question on well, I'm I won't ask a question about the fund balance because I think that's gonna be really interesting, and I think you have more.

But what I'm curious about is when we look at the um target of the yellow line and the gray ending fund balance, right?

We by law are required to have a balanced budget.

But when I look at this, the number goes negative, right?

As your ending fund balance.

But we can't actually we can't actually do that.

Right.

But this is this is what happens if you don't have planned structural solutions in place, and those structural solutions can be both revenue and expenditure or one or the other, but we're gonna talk about how why one or the other doesn't work.

You've got to be have a blend.

So this is an Armageddon, right?

This is if we pulled down.

This is not realistic.

Right.

So it begs the question about why it's really important for us as a team to develop those structural solutions going forward.

Thank you.

All right, so if we can go back to yeah, to that slide.

These are really just I think they're very self-explanatory.

I won't go through them, but it's to keep in mind that what we're doing is that it's fluid, everything's going to continue to evolve.

Uh, the action plan's a living document, so nothing is written in stone.

And I think that's important for the council to remember.

The other is that we have a lot of extenuating circumstances, we have a lot of uncertainty that's happening at the federal and state level, our local economy still has question marks.

So all of these things are gonna come into play when we're developing the budget.

And the other thing is that we're not alone.

Um, while that's not a good thing, it's important to recognize that there are other cities that are struggling like us, and as you heard with um Prop 50 and Prop 5, those are key things that are influencing some of our challenges.

Uh, the other is that this gives us advocacy power.

We have other cities that are struggling along with us, and I think together um we're stronger, and so we'll remember that as we develop our legislative uh goals for the next year as well.

All right, so we have two additional slides that I want to walk you through.

This is um this is kind of an interesting, I think, conversation to have with you.

You know that most of our budget is for personnel, right?

We have approximately 623 full-time FTEs.

If we can go to the next slide.

Um, and what you immediately see when you scan this breakdown is that 44% of our staff is funded 100% for the general fund, while a third or 30% is funded outside of the general fund with sources like utilities, for example.

Um, this is important because making cuts to those non-general fund programs will not address the deficit.

It's really wh important to hold on to.

But the staff, however, they do indirectly affect the general fund because they require services from the general fund like payroll and IT.

And so then there's about 26% of employees that are funded through a combination of funds, right?

With the general fund covering most about 57%.

And in government funds buy services from each other.

So for example, the utility pays for internal support, right?

Like payroll services and on tech for the general fund.

But if you go to the next slide, I want to run through a couple of scenarios with you to show how workforce reductions alone aren't a feasible way to address the shortfall.

So to give you a sense of scale, for example, let's talk about the current year budget.

We projected that the deficit was $15 million, and we applied an assumption of a $5 million underspending, which is why we said the deficit is down to 10 million.

If we cut only general fund employees to hit that 10 million dollar target, that would be a reduction of 42 FTEs.

So for comparison, when you look at the actual budget that we just adopted, we made a reduction of 12 FTEs, and that was already incredibly difficult to do.

So can you imagine doing 42?

That's just not realistic.

And realistically, we wouldn't cut 100% of general fund positions.

And as you recall in the previous slide that I just showed you, there are also employees that are partially general funded, right?

So their impact to the general fund is lower.

And so you can see on the slide that's in front of you to get to the 10 million, you'd have to eliminate more positions.

In fact, you'd have to eliminate 75 positions.

And so this represents 46% of the totally partially general general funded employees.

And so okay, let's pause.

Let's look at it another way to have an example up there on the slide two.

So let's talk about the building that we're in right now, City Hall.

There are 67 total employees in this building that are 100% general funded.

That's a 12.5 million dollar impact, representing about a third of total staff here.

So to close a 10 million dollar budget, you'd have to cut nearly all the staff in this building.

So that gives perspective.

So that's why I think it's important as we're going to move into revenue conversation that Elizabeth's going to present, that it's a balance.

And it's got to be a smart balance because trying to figure out where it makes sense.

So with that, I'm going to pause and I'm going to turn it over to you generation.

All right.

So we're going to walk through kind of some revenue tools that you have at your disposal to consider.

And if you go to the next slide.

So Jenny's mentioned this, but we're going to kind of go over it in a little bit detail.

We have a number of revenue sources in the general fund.

And so the general fund, as we mentioned before, about 54% of the general fund is made up of property taxes.

But there are a number of other revenue sources that come into play.

And one of the things that I wanted to cover in this slide is that there's only a limited number of sources on this pie that you see here on the screen that our city council can really directly impact through actions, you know, in a business meeting.

And that's really only about 23% of the pie.

And so things like permits and fees are things that you can, you know, change, fines and forfeitures, taxes and franchise fees and charges for service.

But 77% of the revenue in this pie are really revenues that to the large extent are outside of council control.

You know, absent significant advocacy work at the state, property taxes other than you know, levies or bonds are really, you know, outside of your control.

Umorfund transfers in, miscellaneous income, et cetera.

And so I share this slide not to be discouraging, but rather to just say that with limited options, it's really important that we're strategic and intentional about revenue options that we um pursue because there aren't um a ton of tools in the toolbox.

Next slide.

And so um, this is a very high-level overview of just some of the tools that you do have available to you in your toolbox as you're thinking about revenue moving forward.

Um so council can vote um directly on establishing fees, and so there are jurisdictions in the region that um have fees set up.

Um it's important that there's a legal nexus to the service provided.

And so a popular uh common example of that is a public safety fee because every resident needs public safety services, so there's a clear legal nexus to establishing that type of fee.

That can be adopted directly by council via resolution, and it can also be repealed via resolution as well.

There are other fines and right-of-way fees that also can be explored.

The amount of revenue that additional fines could bring in is a little uncertain, but it is something that we we could look into.

Right-of-way fees also could be explored, but would again require some legal review.

And then there's a number of options that require resident vote.

So there's a local option levy, which is additional property tax, which provide for operating expenses, usually primarily people, and we'll talk more about that in a minute.

So buildings, equipment, property acquisition.

There are taxes you can consider referring to the voters.

There are jurisdictions in the state that have implemented a payroll tax.

There is a gas tax that could maybe go towards you know streets.

So there are some options that can be explored in that arena.

One thing that I didn't put on this slide that we are currently exploring our business license fees.

So we are doing a study of the structure of our business licenses and what other cities are charging and where we land in that.

And so we're hoping to bring that back to council this fiscal year.

So as we're thinking about revenue tools, there's a number of things that we would advise that you consider moving forward.

One, you know, Jenny just gave an overview of our forecast and talked a little bit about the scale of the deficit.

And so, you know, for the purposes of the fiscal sustainability action plan, we are really looking at what are those high impact tools of a million dollars or more that can really significantly impact the structural deficit that we face.

And that doesn't mean to say that we're not interested in smaller revenue sources at all.

So we're definitely open to feedback and ideas in that arena, but we are really focused on what is it that can really significantly move the needle going forward.

We're also looking, are there any costs to that revenue source that would kind of eat into that revenue?

So do would we have to establish a program and set up staff?

Would we have to purchase new billing software, that type of thing?

The other thing that we would advise be considered are really looking at having a balanced array of revenue sources.

So that sets us up better to weather economic downturns.

And that can also vary the impact that all the revenue sources have on residents.

And then the other thing to think about is timing.

So you know, a brand new revenue mechanism, like a brand new tax or a brand new fee that we don't have at all currently here in the city, is something that just will require some significant time to research, to do engagement on, and to implement and talk with council about.

Those can be funded as a rate, and so that's typically what you see more often than not.

So, you know, for example, a dollar per thousand assessed value, but it can be a fixed dollar amount as well.

And then as we talked about, those are first in line to be reduced if compression comes into play.

And so Jenny talked a little bit about kind of the targeted amount that's in the fiscal sustainability action plan and the need to really look at what amount would be appropriate.

Um we don't have a target amount proposed here, but just to give you a sense of scale and impact in Beaverton for every 10 cents per 1,000 assessed value, which is as a reminder is not the real market value of your home.

So that gives you a sense of the scale.

So there's a lot on this slide, but just wanted to give you something to think about as we start talking about a local option levy.

And explain kind of the difference between two different paths that you might take in terms of timing.

And of course, we know that timing is not the only factor when we're considering a local option levy.

What other things might be on the ballot, and we would also want to look at engagement with likely voters and see what they might have to say about anything that we have to offer.

But I do think it's important to understand the time that's involved in that effort and some of the constraints to that.

So let's just say that we were looking at a May of 2026 ballot measure to refer.

Um and really exploring and engaging and having discussions around what that might look like.

We would probably want to target January to start drafting up that explanatory statement and ballot measure.

And then generally speaking, um the deadline to file the ballot with county elections tends to be in March for a May election.

So you'd really need to kind of make a decision to refer in February.

For the May of 2026 election, we've been making some preliminary inquiries with our partners here in Washington County.

And we know that Twelton Hills Parks and Rec District does plan on going out for a renewal on their bond in May of 2026, and they're doing polling right now, the voters to see how that might be received.

So that's a potential challenge for us to be facing in terms of that timing.

Another complication of doing a ballot measure during May is that we will also concurrently be working on our budget for fiscal year 26-27.

Um if uh we referred a ballot to the voters in May, we would have the fortunate problem of be having to adjust our budget to include the levy revenue.

Uh the tax would go into effect July 1st of 2026, and we would receive the revenue in November of 2026.

Um for November of 2026, um, one of the things that I want to highlight that's different for November measures is I'm going to jump ahead to the November 2026 election for a levy that goes uh to the ballot in November of 2026.

That would not go into effect until July 1st of 2027, and we would receive the revenue in November of 2027.

So a key difference in terms of timing when you're going out in November to think about is that we would need to be able to kind of float our budget in some way or make some uh temporary reductions uh in our budget because we would not be able to include that levy revenue until um November of 2027.

So it is something to think about and discuss as we think a little bit about timing.

Um next slide, please.

So this is our final slide.

Um so next steps for us, um we do have a community survey and um ongoing engagement and we'll be debriefing um about that, and that can help it kind of inform next steps.

Um we are starting to work on our budget process already for fiscal year 2026-27.

As Jenny mentioned, we're beginning uh this fall with our general fund forecast refinement to give us a better idea of what we're gonna be facing.

And then we do plan on coming back to council in um October as a follow-up to this discussion, and we will really be looking to this body to advise on the next steps to refine our fiscal sustainability action plan.

Um I would say there's been a lot of information that's presented today, and if there's questions that occur to you after the meeting tonight, as you're reflecting upon the discussion, um, we do have this as a topic for your September council briefings, and you're certainly welcome to bring that up and have some time to discuss in that space if if things occur to you after this particular meeting.

And so with that, thank you for your time and attention uh during that presentation, and we're happy to open it up for questions.

Um first let me just start by saying uh Elizabeth, this presentation was excellent.

I think the the deep um look at measure 5 and 50 and the impact and the examples.

Um I mean, compression is difficult, and we are in special district heaven here, as you know, so we're competing, which is just shocking that we're not in compression because we have this special district water and fire um in parks, and every time they raise revenue, it puts us closer to this.

And the largest school district in the state does not I mean it does a lot of things for our economy, but it does not help us when it comes to compression.

So this understanding laid out this way was excellent, and I hope that future counselors can watch and learn from this.

Um Jenny, I do want to just say like the remarkable work of the FTE reduction on the expenditures, and sometimes as elected officials, you know, we make the hard choice to make the cuts, but we're not the ones that have to implement the decisions we make, and we're not the ones that often have to sit across from employees and explain the decisions, and you know, it is it is quite a relationship between elected officials and the management of the organization of like we kind of carry different responsibilities and burdens in this equation.

Um local government, unlike state government, the repercussions of our decisions are right ahead of us.

We don't get a biennium in two years in between before we enter the building again.

So this was a well done presentation, and I'm really glad that we took some time tonight as somebody that is intimately involved with uh 5 and 50 discussions with the state.

That is not I just want to like frame the council like that is not a that isn't a strategy exiting tonight.

We can't kick the can and say, I hope Salem fixed it, because until our problem is their problem, they're not going to address it.

And we have put League of Cities, the mayor's association has put many things in front of them to carry a bill, and it's just not sexy enough for them because they profit off of income tax that cities generate.

And I think you know, we talked a little bit about the economy early on in this.

We're not really rocked by the economy in a lot of ways, which is why cities were pretty stable during COVID.

Where we see it though, is like business licensing, um permit fees, stuff like that.

But this the staff that attached to it ebb and flows, and one of the things is somebody that came elect, you know, was elected shortly after the housing crisis in 2008, is when we make cuts when we don't see permits, it's really difficult to get back those technical stilled workers.

And so we can't ebb and flow on the CDD technical side.

Sometimes we have to weather the storm because if we let a skilled building inspector go, they're most certainly not coming back.

And when we, you know, and I know most of us care about the roads and a gas tax and a tr and a uh transportation utility tax for the roads, but that doesn't address the structural problem.

So I want to make sure that as we're discussing things going forward, we keep this in a realistic context because as the mayor, I'm not gonna let you off the hook and say I hope the legislature fixes it.

We're gonna have to come out with some real um solutions.

Counselor Duggar, were you first, Counselor Hartman?

Counselor Duggar?

Thank you.

Thank you, Mayor.

Uh a few questions.

Um, and I don't know who maybe I'll just look at you and then you can direct.

Um first one.

Have we finalized the analysis of what essential services are?

Like have we defined that yet?

A little bit of kind of ranking of that, but that was actually within the subcommittee.

We haven't had a conversation.

And I'm not sure that I want to have the conversation because that's really uncomfortable.

And I don't what is essential to me might not be essential to you or vice versa.

So I I think it might be helpful if we understood what some of the services our peer cities were delivering versus what we are.

I think I don't know if that's possible for us to to look at, but um, I do think about everything costs and every these are but these are also real people we're talking about, so I want to be really careful with that discussion.

Um couple other questions within the general fund.

Have we completely accounted for all possible expenses we can shift to other funds?

Because you I know I know you mentioned things like payroll and stuff like that.

Is there any more fat to move over to the other funds that you're aware of?

We've done and we do that analysis regularly.

I know we also just did that.

Um yeah, we regularly look at the goes ongoing.

And it's it's actually a best practice for us to look at.

But I wanted to also uh remind um the council that when we had our general fund kind of program conversation in the materials that we gave you, we try to do a little bit of kind of some paper trail of that that's helpful to get back in front of council.

Refresh that I think that'd be helpful.

We we have these in budget and then we immediately go to something else.

So I think that would be um I don't think this is available.

Do we have any polling available for the general public appetite or do we have a plan to get that?

Because I think that's really important for us to know.

Not available, but yes, there is a plan.

How soon?

I would like that.

Like to me, maybe there's a question.

Yeah, she's asking you to read between the lines, it's coming.

Okay.

I mean, if you release all the polling data before we can make a decision, that's not helpful.

But we are gonna have uh there's no poll yet for all those people searching the public records.

Uh we'll have that information prior to making a decision, but we're competing with um THPRD is also in the field, and the the issue that a majority of our public, and I know counselor Hartmeyer Preg used to serve on THPRD, but the majority of our community thinks they're a division of the city, and so when they jumped us to the polling, it can't look like the city has two polls out at the same time, and we we have our community survey, and so we're using the community survey um to tweak before we go out.

So if we get a significant um off either side response on the poll on the community survey, we might address the polling, but just for the council to remember the community survey is a really great tool for how we address city services.

As elected officials, you understand the difference of people voting versus what the community generally feels, and so we have to be highly focused on what voters will approve because trying to convince someone to vote and then vote for whatever you're asking them is too too many steps.

And we know voter turnout is around 30%.

So while the survey is really great and it helps us make decisions about services, it fails to ask the question, what are you willing to pay for?

Exactly.

And as staff, this is not a critique, but we are really awesome at asking the community, what do you want in the future?

We really suck at saying what are you willing to pay for.

I think my last ask is I heard uh actually I want to echo like it was really helpful the con discussions around the measure 5 and 50 compression.

Like I'd always had that question, like the cap is that per government unit, or is it something we all get $10?

And nope, so that was really helpful.

Um I I do think it would be helpful for us to look at uh tigered to Walleton, Hillsborough, like their total, and I know it's not gonna be apples to apples because when I look at Hillsborough, right?

They have their own fire department and they do their own parks, right?

But like Tiger, for instance, they have an operating levy, like I don't know anything about it.

Like, what does it look like?

What is it fund?

How much is it, and then what does that look like to their base rate?

So these are some of the things that that um I think we're you know to my colleagues.

I do think we have to look really long and hard about revenue, and I'm ready to do that.

Uh I don't want to do that, but we need to do that.

It's not a one, it's a need thing.

But I think it would be helpful for us to understand what our neighbors are doing and what they're paying for and what they're getting out of that.

I I would just say, like I hear you.

Our base rate is higher.

So we're already gonna set the trend on that.

So um what was was wasn't discussed up here in 5 and 50, and probably Elizabeth has a little bit of experience of this coming from Gresham.

The way that they they rolled up your base rate had a lot to do with the taxes you were levying at the time.

Beaverton had the like five cents for the police and other things that got rolled into our permanent levy.

This is an ongoing fight that we're having with the county over the transportation fee because it got rolled into their general obligation levy, so they're actually not technically obligated to spend it the way that we have all agreed and come accustomed to.

And so one of the large fights that we're having with the county is we're like this money needs to be spent on roads, and they're like, well, too bad, so sad, it's actually in our general fund.

So we can give you that information.

I guarantee it's not gonna help you make your decision.

Cool, that's all I had.

But I think it would be because what's Gresham's base rate, wasn't it 230?

How quickly you forget in a couple of minutes.

Um I believe that their tax rate was three dollars and sixty-one cents and their levy was a dollar thirty-five.

Yeah, ours is like four something similar size city, and they don't have special districts, so they are they have fire and parks wrapped into the 360.

And so we have our rate that is higher, and we have our special districts levying on top of it.

Counselor Hartmeyer, Prague.

Yeah, thank you.

Um I really appreciate the focus on that like cuts aren't the only way, right?

You know, and and also like to see the the head count trend and to just the realization, right?

Uh I do recall that part of our last um presentation about like kind of what's uh what's required of us from various um requirement creators, right?

Because we we are one of those ourselves, and so I think um bringing that into the next conversation will be helpful is just a reminder of like where did we kind of obligate ourselves to things because those are things maybe we said were nice to have or must haves, right?

At a time, but I think that I think the revenue piece is probably where I'm the most like interested in what council can do to help.

Um, I know that the voters are gonna struggle with what's going on with the timeline with THPRD, and also I can't imagine us losing another year of opportunity to increase our revenue through the levy.

Um, what you're saying about like you know, if you lose technical stuff, and even if we know like it's coming back, like they're gone.

Why would they no one's gonna you can't just hang around and wait for your job to come back, right?

So I think for me, the the May path feels pretty critical for us to be able to start moving forward with more of the revenue side of our fiscal sustainability plan and and how do we kind of shore that up because to see how far we've gotten on the expense reduction side is it's significant, right?

We've really very close to that goal, and I don't know what else we can cut, right?

There's it just feels like we're already everyone feels it.

Staff especially feels it because of the limitations that you know you're all working within.

So just want to acknowledge that because this has come at a lot of staff sacrifice, right?

Picking up more work, and um so now we need to come up on the revenue side and and help with that as well.

So um, I know that there's still more to come about the levy, but uh to me the May option is the most compelling just to know that we would lose a whole other year of revenue and and and what does that look like?

What is that temporary cut look like?

We in some ways that might not be temporary, so maybe that causes it's some sort of catalyst for additional change, but there's nowhere, you know, there's nowhere else to go on the cut, from what I from my opinion on what I see.

So um a May path looks really interesting to me.

Counselor Tibnon.

Okay.

Thank you.

Um so I just want to echo that presentation was extremely helpful.

Thank you for the walkthrough of that.

Um a few things came to mind for me, and none of them are really any earth-shattering new questions.

It's just that especially around the efficiencies that have been achieved so far, like hearing the updates on progress made towards all the decisions that we've collectively already made.

It's very heartening to see a lot of those numbers coming in above projection, first of all.

And also um just realistic, something's didn't pan out as being really viable, but that we're exploring them.

And the fact that the efficiencies are um being discovered that are freeing up capacity um capacity amongst our existing full-time staff is really wonderful to see.

And I would love to make sure that we're continuing to just turn over all the stones on that and potentially some sort of a knowledge transfer with other cities because everyone is having to look at this and and also exploring AI and the efficiencies it's bringing, regardless of our financial position, that would happen anyway, just because this is uh the the moment we're in technologically.

Um, so I I I would love, and I'm sure that you're already doing this, whether it's formally or informally of talking to other um cities staff and and finding out what they're doing just to make sure that we're all kind of helping each other through this with really good practices.

So that was something that came to mind.

Um the other thing is that I I don't have a lot of opinions tonight.

I don't think that's what you were expecting from us.

It's just like expectations for how we're continuing to have this conversation.

And the biggest thing is that we put all of the potentially feasible scenarios up and on the table for us to look at, even the ones that are really unattractive and that we're pretty sure no one's gonna be into them.

It to have everything out there for us to look at.

I think it's gonna help us get to that place of like Counselor Dagger was saying, and uh mayor was saying we're gonna have very difficult decisions, and it's very hard to make those with confidence unless you know you've explored it all.

And so that's the part that I'm looking forward to in this.

And I can tell from the way that you crafted this meeting tonight and the way you've carried the council along and giving us information that you are looking at all of the options.

It's just um resounding enthusiastic yay.

Uh, even the stink bombs in there of let's let's look at it all.

Um the other thing is our fundamental values as a council and as individual counselors is going to come into play on this on what does it mean to provide service to the city.

What is the city's responsibility?

And I I'm very curious how we're gonna thread that in to this to this conversation and what the order of that looks like, and um uh and just asking for a lot of guidance um for the council to help us have those conversations as we're looking through all of this, and then the last thing that comes to mind to me is communication.

I agree with Counselor Hartmeyer Prigg.

I think um let's move on this um as swiftly as we can, but also we have a whole lot of talking to do to individuals and including raising up their level of understanding uh in the same way that you're raising up ours and just thinking through how we're gonna do that and do it in amongst the the noise of a lot of other asks that are out there right now.

So um that's that's what I had on my mind tonight.

Counselor Teter.

Yeah, thanks for this presentation.

Uh I've got a one question and then a couple comments.

Um I am curious about our lodging tax ability or our ability to raise lodging taxes, what that could do to support uh some services in the general fund like our arts program.

Um can you all talk a little bit about lodging tax revenue uh to increase it on our own?

If so, is it actually helpful?

Um it help offset some of the general fund.

Like any input that you all have.

I mean, we certainly can explore that.

I think we have to take a look at our current vacancy rate right now, which is a little bit challenging, and I think it's challenging in the region, and so we'd also need to work with our stakeholders to see if there's an appetite for that because we don't also want to create inadvertently create harm too.

Um, but there is an opportunity to if we can increase that, that gives us a chance to offset some of the costs on, for instance, part.

So that would be a strategy.

We're looking at that, but right now I don't think there's a whole lot.

Um, staff may be able to answer that.

Susan might have those numbers.

I would also just like remind the council that nobody books hotel rooms and goes, I wonder what the TLT cost is.

I travel very frequently, and uh, as a government nerd, I look at the fees that they often put on there, and it's like nobody books hotel rooms that way, so I don't think it's I mean, the hoteliers are gonna say they're gonna bulk, but like that is not how people make decisions.

So I would say, like, I have wholeheartedly as one of the people that masterminded getting the TLT at a city level, like we should be raising TLT to be commiserate so outside people are paying for the services they're doing.

There is room in the legislation because we can't use it for some of the things that we would really like, like policing at night market that brings in a large wild people, but it has always been the plan of the city, or at least the architects of who did TLT for arts to move into the TLT fund, and it was in the TLT fund prior to 2020 and then the crash.

So there are things I think what counselor teeter is getting at, which is we know that these small fixes aren't gonna create the massive fix that you need, but every time we could save two or three jobs, the pressure on the council to get it in a ballot is lower.

CDD is a great example of being able to do you know cost recovery in their work, you know, we can do this with the arts, and I think the council needs to see some of that before we could go out to the voters and say we have done everything possible because we get it's not gonna fix the structural issue, but it will fix our ability to talk about what we've done, and that's an important issue.

So please with the TLT.

Yeah, so the city has a four percent transient lodging tax currently, which the city council can raise at their discretion.

Um, as the mayor mentioned, the state legislature does limit it.

70% needs to go for tourist promotion versus 30% can go for general services.

Beaverton has an additional layer of obligation on that TLT, and that that is for the Patricia Research Center for the Arts.

And so we will, as Jenny mentioned, we will be reviewing that over the course of the next fiscal year.

A large portion of that is dedicated to the payback of the debt for the building, and then another portion is dedicated for the um operations of the bill of the performing arts that happen inside the building.

And uh our TLT unfortunately has not risen to the amount that we were hoping for at the time uh it was put in by the city council because of the pandemic.

We were hoping by this time in 2025, the TLT would be able to pay for general fund services, but because of the pandemic, a number of hotels were delayed in their construction.

A couple of them didn't even come to Beaverton that were planning on coming, and then of course, as Jenny mentioned, the occupancy rates um has suffered.

And so we're still sort of in that recovery mode for the transient lodging tax.

And then we'll be looking at the PRCA and those obligations that we have in those intergovernmental agreements and and those operating agreements of what our commitments are for the PRCA with that tax.

Okay.

Thank you.

That's helpful.

Yeah, I wouldn't want to put the research funding in jeopardy, but I my heart in asking this question is that we are continually raising fees and taxes on our local residents, and I think it's fair to explore what it what the costs are for the visitors who are coming and using some of the uh so this wouldn't be as high of a priority for me as getting a levy passed.

Uh but if we can include it in some of our financial planning, at least looking towards the future, that could be really helpful for me, just to have it as one of our options as we talk about it with voters.

Um with Councillor Hartmeyer Prigg, I would want to go for a levy this May.

I think it makes sense with our council elections being in May.

Like I would I I think pushing for the voter turnout for our local city elections will be easier if we're saying vote for your city councillors and you vote on your vote on the levy if you want it or not, but you gotta vote in May.

Uh just May would typically be November.

But I don't want to split our efforts of council elections and then uh the levy is separate.

I think it just kind of throws a lot of work.

Elections are already a lot of work, and so um I'd be willing to put in the work for the levy, but it sure would make if it's in May.

Um and really higher uh for that.

Uh one final comment, unless you want to jump in Mayor.

Okay.

Uh when we're telling the story of why people should vote for a levy, um really need to highlight that not only have we made reductions and we've increased and uh revenues in other areas, we've also brought in a lot of incredibly meaningful grant revenue, uh no cost to the city.

And up a houseless shelter at no cost to the city.

Um we've done some great things with partnerships across all levels of government.

Um and that story definitely needs to be told because I think not easy work for the mayor can attest, but I think we really need to tell that story well too.

Are you saying we need to be better storytellers?

I didn't even set that up.

Counselor Kimmy.

Okay.

Um I see the graph.

I mean, thank you for the presentation.

That's just awesome.

Umiddle of 2026, that's where we go below the mark, right?

So we definitely need to do major changes or increase revenue or make radical changes before uh before that mark, right?

Right, and that that assumes that we don't have structural changes in place on either the revenue or expenditure side or both.

Right.

Um another question is uh our revenue side it's kind of flattens out, and then expenditure grows because of our contractual obligation to the labor.

But the revenue still has to grow by 30 percent, but it's not growing or is wise flat.

So what's based in here, and um Susan and Debbie can underscore that is just the standard 3.6 percent on the property tax, and we're making that assumption, and we check that every year, and then two percent on all other revenue.

And that's pretty traditionally what it's been, and there's no opportunity for that to increase beyond that based on our current trending.

So revenue still flats correct, and expenditures are outpacing that at a remarkable um clut.

And expenditures are outpacing that at a remarkable club.

Right.

Okay.

So looking at the other other slide, public safety fee that we talked about, how does it uh how do we collect it if it happens?

Or what does that mean by public safety fee?

Okay.

Okay.

Sorry.

Yeah.

Um so there are um many jurisdictions that have some sort of public safety fee.

And so um one way that fees are typically collected is on our utility bill, right?

And so because that's a billing mechanism we already have in place, um, we have ways to deal with um non-payment uh issues, and then typically there's usually an assistance program that goes along with the utility bill that can at least help mitigate some of that impact.

And so um other jurisdictions that have that fee, um, it really depends on kind of what is needed in the fee or wanted in the fee, right?

And so I know um, for example, in Gresham they had uh police fire and safety fee.

Um police fire parks fee, sorry, um, and that was 95% police and fire, and five percent of it went to parks.

And so it really depends on how much um it's you want to structure it for, depending on what your revenue solution is.

So for example, Gresham right now has both a public safety fee and a levy, um, just because their financial situation was such that that was what was needed.

Um and so you because council is able to form that via resolution, you can have a flat fee, you can have a fee that gets indexed every year, but it's something that's kind of within council's purview.

And that has to be used to public safety only.

Well, it's it depends on the fee that you create, right?

And there just has to be a legal nexus between the services that the fee is paying for, and so um it needs to relate.

And so um I was just using public safety as an example um because um that's a common one, but there are folks that for those full service cities that offer parks, they might have just a parks fee um, right, that just pays for um the park services.

We do we do have a fee currently, we do have a franchise fee that's council approved.

That when you cut in, we pass because when you cut into the road, yeah, you're not repairing it, and the money needs to go back to the road.

So we've done fees as a council before.

Okay.

Oh you said 10% um limit, right?

Uh for what you call that.

Yeah, compression.

How what are we right now?

How far are we up from the temp uh 10% compression or $10 compression?

Yeah, so it's $10 per thousand assessed value, and so um Beaverton's amount, um, if I'm recalling correctly, is $11.89, but it's calculated on a per property basis.

And so it just depends on the gap between the assessed value and the real market value.

So it's difficult to give you an exact estimate.

Um right now, um, we are really only losing around 87,000 per year to compression over time as um other jurisdictions either add levies or increase their um levies or bonds, we will run the risk of entering into compression more.

And then um, if the market um shifts as well and there's some significant swings in real market value, we could also run the risk of compression.

So we are at compression right now, above compression.

Well, it's on a per property basis.

So there are some properties that are within compression, but but because it's really so tied to the real market value and the assessed value, um it's really not every property within the city.

Okay.

Um that's a little too complicated for me.

It is very complicated to I would agree.

Um our main driver for um our expenditure is the FTE uh personnel, right?

Um without addressing that with that's the structural deficit driver.

Without addressing that, I don't it might cut simple math, we don't have enough revenue to cover for that.

So we are talking about revenue because we don't want to do the hard thing, trying to avoid um cutting and then downsizing, but then that is the structure deficit.

So I think we have to address that somehow.

I know we had um uh subcommittee about sustainability that addressed essential and non-essential services.

So no matter what, I think we have to go through the essential non-essential services targeted reductions or targeted cuts on the services to address the structural deficit.

So if we can fix structural deficit, so then uh revenues will fill the gaps, but we cannot depend on the revenue side to fill the structural deficit.

There's no way, like how much are we gonna raise to fix the structural deficit?

What is the expected income that you guys that's that the staff thinks that we're gonna bring in by raising fees?

I mean in in reality.

And what is the levy that's not sustainable?

How long is the levy?

And that's gonna be one-time fix for a short amount of time, right?

So it doesn't address the structural deficit.

So then after levy runs out, we're just hoping that we're gonna pass another levy, right?

After a few years, but that levy has to go up because of inflation and our expenditures to screw too, right?

So I I would love to have that conversation, hard conversation that we have to adjust service to do the service reductions.

And today I was watching Washington County wrote a lovely letter, but predicted it.

So money's not coming to our libraries, right?

And I don't know how long how long the Scholes Ferry Library will be sustainable.

Uh so without essential services, what are the services that we provide that could address the structure deficit?

That's my question.

Because we cannot keep cutting the services and cutting redux reduce the personnel, we have to cut the uh non-essential services that we provide that other cities don't provide, that will significantly reduce our expenditure.

And that's my input.

That's what I like to have in the conversation because without that, our no matter how much fee we're gonna increase, we're not gonna cover, I think probably even less than half.

I would I'll say 20 to 25% of our expenditure.

Um somebody can verify my math, but so we have majority of the deficit that still exists, structured deficit that's gonna be uh driving factor for our deficit.

So that I get kind of nervous about it.

The timeline is next year, middle of next year, if levy fails, right?

Then immediately we're gonna go down going into our savings.

So we need to make that choice go before going into the levy conversation.

The levy is good to have, but that only covers certain percentage, less than probably 20, 25 percent of the total expenditure.

So we have to address 70 to 75% of the expenditure by reducing services.

That's that's in my head.

Sorry about that.

So that's my input.

Thank you.

I I don't disagree, but when you look at page um, if they're not numbered, but that's 75 FTE.

And I'm old enough to remember just four months ago when you guys would not cut during the budget in May.

So I appreciate what you're saying, but we've been trying to have this conversation for four years, and a lot of us at the Dais have have been stopping it.

So just keep that in mind.

75 employees is what it would take to cut the deficit from where we are without raising fees at the same time.

Who was first?

Go ahead, Councillor Hartmare.

Thank you.

Yeah, I definitely, I mean, I think that's why the plan is both, right?

There's still expense reduction and revenue generation.

Um I had a question that I think I should kind of know by now, but in this context, I'm curious around Burea.

And that Bureau's goal, right?

Is like we're this year, for example, we we were able to leave some of the um tax increment back to the districts, including ourselves, right?

But at what point, and this is why I feel like I should know this.

Is that like I know we're uh we're getting close to our maximum indebtedness, right?

We're working on our next five-year plan for Bureau, but at what point does the um the end of Bira, right?

And and that when when does that tax increment come into our projections of our revenue as well?

Um, just because as we're kind of talking about the temporary nature of certain things, like not that that's gonna fix everything.

I really have no idea how much tax increment um and of that becomes cities, right?

Given these breakdowns, but I'm just thinking about that, like at least our commercial or the business side of the piece was larger than multifamily, right?

And and it is its assessed value is a higher assessed value.

So I guess I'm just curious, how does that come into the picture?

And at what point?

So I think uh Susan or Debbie can talk about the timing.

It's important to know that when Bureau sunsets, and let's say there's not a Bureau 2.0, you your priority is that you have to pay off the debt first.

So that so that property tax increment is not gonna readily come right into the general fund right away.

So maybe Susan, you could talk about the timing of that, what you estimate that big.

Sure.

Um Bureau is a 30-year plan.

So 2042 would be the last year of Bureau, and then 2043, if nothing else were to occur, those taxes uh that are divided to Bureau would then come to the general fund.

And as Jenny pointed out, the debt would still be the obligation of the city.

So if the debt for Bureau is not paid off by that time, that obligation would also transfer to the general fund.

And so then it would it would just be some math um to figure out you know what that net would be.

Um, but it would the net to the general fund would be substantially more than the debt obligation.

And so currently, um off the top of my head, I believe it's roughly two-ish million that is divided to Bureau from the general fund from the for the city portion, and that does grow each year as um Elizabeth pointed out under measure 50, it grows by three percent plus new construction.

And so we anticipate it to be fairly substantial in the year 2043, as you can imagine.

So and the under levy takes a little portion of that if we continue to do that each and every year until we get to the point that Bureau closes.

And I would just like point out a couple practical things from our side, and many of you guys went on the walking tour with me, and and I remember I think it was Kevin and John and you both were like, well, we just we need the multi-family here.

And I'm like, if we do multi-family here, we're gonna shoot ourselves in the foot because we collect such little property value, and our job is to return value to the district, and the payer mix we need needs to be commercial, not residential.

The majority of what we built has been residential in the parking garage in the research that don't pay property tax.

And so we do have the hotel, we have the apartments right here, but Bureau, because of COVID, the majority of what we purchased, we have not built on.

And if we pull the money from Bureau, housing infrastructure gonna make it go.

So we could realize a short-term amount, but really the long-term value, and that's why I think when we go back into our Bureau seats and we start talking about the plan and why there's been I think a lot of conflict between the council that's like more housing, do the things, and with some of us that have been around for a long time looking at property taxes, like, no, we have to do these commercial spaces.

If we do if we don't do that, the amount of property tax revenue we're gonna bring in is significantly lower.

Yeah, thank you.

And that's why I was also asking about the timeline is I don't I don't want it for the short term.

I was curious, like, when do we get to that point where that is on our our that becomes part of the plan?

Well, it'd be great if this the euro director could help us out with a plan on getting some commercial space about all these lots we own, no pressure.

And mayor, to your point, um, apartment buildings, fun fact, are put on the tax rolls at roughly 33% of their value.

So apartments are very low in their assessed value.

Counselor Duggar.

Yeah, a couple I'm gonna use her analogy.

Council Hermione.

I feel like I should know this by now, but for those assumptions in the graph.

Um how does Cooper Mountain Right?

We we've spent a lot of money building the plan.

We have not received much revenue because it's not in the city.

So how does that account for how are we accounting for future revenues coming in from the um so I might ask Susan to come back up um again?

Sorry, Susan.

Um should just join us.

I think she's best suited to talking about the assumptions in the forecast.

Yeah, so uh when Cooper Mountain annexes into the city, that would be part of new construction, and it takes quite a bit of new construction on the residential side uh to yield substantial revenue for the city.

So we currently in our forecasts have a general assumption of assessed valuation based on past.

It's so we generally assume roughly three and a half percent comes into the general fund.

And so once Cooper Mountain annexes, then we can see how that might affect that equation.

So if if if by the constitution it can grow by three percent, and we're assuming three and a half percent, that tells you that we're assuming a half a percent and assessed valuation growth um citywide.

Yeah, Bureau grows it a little higher, but that is restricted to the to that geographic region.

Okay.

So uh I'm just so I understand like it's it's not assumed to be in there now, but we don't expect it to change that equation very much.

Correct, it might go up to three point seven five instead of three and a half, and that would be uh handful of years in the future, maybe four to five to six years in the future.

Um and then don't go for it, because they I have a one more question on assumptions.

Can you talk about our assumptions for health care and PERS?

Uh sure.

Um for the public employees retirement system, it increases every five year uh every other year on the biennium, and roughly it goes up five percentage points, which equates to 17% give or take on a percent increase basis.

Uh the reason why we know PERS is gonna be fairly steady uh on an increasing basis is how PERS itself is structured.

Um so we have a level of certainty with the PERS with medical and dental, uh we rely on the negotiating ability of our HR director, and that has been roughly 10-ish to 12-ish percent each year, and we don't really expect that to change um in the coming future.

So go ahead.

But I would also say on PERS, there's been points that it is a larger and we've had to go and backfill it.

We had to do it five years ago when you were on the budget committee.

The PERS forward cash revenue from last week was really terrible.

So I'm a guessing there's gonna be a larger adjustment coming.

And so while it is relatively steady, there are points along the PERS journey which we have to backfill because it's our obligation to our PERS reserve.

Yes, and they they re PERS itself restricts the growth, so it can only increase a certain amount and then they kick the can down the road and add that percent growth to the future.

So it compounds itself into the future.

Counselor Teter Uh Thanks.

I really appreciate that here and non-questions as we're uh Counselor Kimmy.

I might uh understand understood something you're saying, but I did want to respond a little bit because you said we want to make sure we were doing the hard work first before raising revenues and I wanna from the work that we have done as a council and as staff of doing that hard work.

Like we've had we have cut 32 and a half positions or so um already.

And there's just not much further that we can realistically go without cutting a major service that people depend on.

Uh so I mean I think your point is we need to have a good blend of reductions and increases.

But I I think we are doing that.

I think the plan's showing really what really uh I think the plan has been really good and you just showed that really well here in this document.

Um but I just really wanted to affirm like the hard work is being done, and we'll keep on doing that.

Like there'll probably be future reductions as well, but um we need to honor the work that we did before too.

And some hard decisions on council on the council diet, and sure hard decisions at the staff level as well.

Counselor Kimmy.

Oh, yeah, I do uh I've yeah, it was hard decisions last few years, definitely every time budget cycle comes around.

Um but my point was I looked at timeline uh next year, mid-cycle.

And we are not catching up enough, right?

And that's that was my uh maybe I said it in a such a doomsday way, but but you know, everything's beeping right now, so we've got to make some harder choices, I should say.

Uh but that that was the point I was making.

We are just not making enough uh progress on uh um to c to address the structural deficit.

That's that was the point.

I know staff is doing whatever job they can to minimize the impact to the city and services, but how we have approach uh and then our timeline uh next year mid-cycle may uh it's it's gonna impact us.

That was the point I was making.

Um one thing beside that uh with with the shared services uh insurance.

I know Consul Letogger and I talked about just a little bit.

Um can we share services insurance with other city employees and counties?

Is that legal possible to get a better deal?

You mean like pooled?

Yeah.

It's possible.

Right.

We have to have some type of intergovernmental agreement to do that, but it exists in other um jurisdictions that have come from cities that have parked.

Can I also point out that that would be a negotiation with our union?

It's not that simple.

It's not that simple, but one of the things I I'll be interested in looking at if it's gonna address if they're gonna be see similar services and then pay less for the city.

That's what I'm looking at.

Not that everybody would get a Kaiser.

I'm not saying that, but no, my point is that is a negotiated uh benefit of our union that we cannot simply change without going back into a negotiation.

I get that.

I I think the point, Councilor Kimmy, on this is that we're gonna be in this dance regardless of whether we have a levy or not.

And so if we're successful and if that's the direction that the council and the community wants to go, that doesn't mean that we're not gonna continue to have conversations around service delivery.

And it's just going to be a fact of life, unfortunately.

Okay, council.

Here's a couple things.

You got a lot of information tonight.

I think you're gonna walk out of tonight's meeting with your mind spinning in a thousand different directions.

You're gonna have ideas about insurance polls, you're gonna have an idea uh TLT, you're gonna have questions about Bureau.

I would really encourage you to write them down and use the time your one-on-one times with the city manager.

She'll tell you if it's a good idea or if it's not been thought about or it's been thought about, or maybe the history and I know a lot of history of what we've done we've done and have worked on in the past, so I'm happy to have those conversations with you guys as well.

This is uh designed to be the start of a conversation, not every input we're gonna have along the way.

And I can see, like me, you're wrestling with the decision.

And what I keep telling staff in my one-on-ones as we're talking about the budget and the levy and the kind of direction we're going is like I need to with really good certainty be able to tell the residents that I've done everything possible.

And that's what I hear out of your questions.

All of your questions are this searching around how do I tell my neighbors that we've done everything possible.

So while this is fresh and right in front of you, I would encourage you over the next couple of days to write down those questions.

And the city manager will not treat you dumb.

I, on the other hand, might so just figure out which ones uh who you want to go to, mommy or mommy here, but write them out.

You know, their idea I mean, I will tell you it was a city council idea to raise TLT revenue.

The staff didn't want to do it, the mayor didn't want to do it.

So there there is ideas out there that can be done.

I think the city manager's point in a lot of this, and you know, she calls me the idea factory, so there's no shortage of those conversations between her and I.

She constantly reminds me of the cost, and I go, well, okay, well, if that's not only the only excuse, what's next?

So write 'em down.

We're gonna have more conversations on this.

Um, you know, we have an expert in Elizabeth that has come from the city that has just done this back to back times and how they've done fees, and so I encourage you to get all of your questions asked, because we will be making this decision together.

And my uh there's not very many times as the mayor I've asked us to be in unison as we're making decisions, but this is one of those ones I feel really important that we gotta move together as a unified front to the community because one of us doesn't get to take the easy road out and tell the voters, well, I didn't want to vote for that tax increase while the other six do the easy work.

Like I'm not uh I won't allow that and without uh substantial justification in your stance.

So be prepared.

This is not a an easy road for any of us.

I will also say that counselor Kimmy hit a good point with the county commission today.

I have had Elizabeth and I have had full battle over the library levy, and I just I can't support it.

We're gonna do a sixty-seven percent increase to our residents, and we're not getting our fair share.

We know that that increase is still gonna mean cuts for us.

They feel like they've done that they've given us a little bit.

I spent today calling all the mayors.

I would highly suggest you call the county commissioners.

There is a little bit of them that thinks it's just me and not you.

So call counselor Fai, call Councillor Tries, call the chair, call Jason Snyder and appeal to him.

He was a mayor six months ago.

He already drank the Kool-Aid, he already forgot what cities are doing.

Um your endorsements in a chair's race are gonna matter.

Your endorsements of this levy will matter.

Do not throw your endorsements away and then come in this building and say we shouldn't have done that, and then go support the people that are raising the fees.

Use your endorsement wisely.

Make these next month weeks hard on them.

They are protecting their general fund at the cost of our voters and our library.

They said today they didn't think the bookmobile brought a lot of value.

Go take a video.

Ask them what is the value of going to the lodge where seniors can't drive?

What is the value of our non-uh English speaking people at Virginia RCA getting books?

Because they don't see it because they're not as close to the people as us.

Don't allow them to make these assumptions about our community when we're making the decisions.

That bookmobile matters.

Our staff at the library matter.

They are out there on the front line doing the work that the counties asked them by being a cooling shelter, being a warming shelter, doing things outside of what they went to school to do.

And we're gonna ask our voters at the expense of our own levy to raise taxes for a library that we're not going to get.

It is not our responsibility to offset the library to other residents that do not pay taxes into the city.

So don't waste this moment.

I want you guys to do it.

Call your city councilor friends on other councils and let them know that you're not supporting it and ask them to chime in as well.

It can't just be me.

It's got to be us in this scenario.

So tonight was hard.

This is a lot of information.

What I heard out coming out today, we we still have a couple questions.

I saw Jenny feverly writing them down to help us get where we need to go.

The Bureau executive director is gonna quickly get a plan for all of this empty space.

I mean, just like exit texting feverishly.

The HR director is gonna do the Lord's work and bringing down our insurance pool, and all of that is magically gonna come together in the next three months.

I don't know what Dan's gonna do, but we're gonna put them in.

So thank you again for adding a lot of commentary to tonight, Dan.

We appreciate your input into tonight's meeting.

Um thank you guys for joining us this evening, and I would encourage the council, write your questions down.

This was a good meeting.

And with that, do you have anything before I adjourn?

We're adjourned.

Recording stopped.