We are recording.

Good evening, everyone.

I will call to order the meeting of the Bethlehem City Council Finance Committee.

My name is Michael Cologne, Chair of the Finance Committee.

The other committee members are Justin Eamon and Hillary Cleopatra.

Mr.

Miller, please call the roll.

Mr.

Cologne.

Present.

Mr.

Raymond.

Present.

Ms.

Queck.

Present.

Thank you, Mr.

Millen.

We don't have any other council members with us at the moment.

I'll acknowledge anyone else who joins us.

There are three agenda items for tonight's meeting.

Number one is a proposal for restructuring of existing general fund debt.

Second is a proposed ordinance involving a budget adjustment involving the capital budget for non-utilities.

And lastly, we'll go over a proposed resolution involving a proposed transfer within the general funds to provide matching grant funds.

I'll accept public comment at the top.

Now please there be any public comment is concluded.

Moving on to agenda item number one, the proposal to restructure its existing general fund debt.

I'll open it up with Mr.

Evans and anyone else who's going to present, and then I'll open it up to committee members for comments.

Thank you, Chairman Cologne.

I have a statement I'm going to going to read to explain what we're doing here tonight.

Then as you can see, Scott Chair from PFM is with us, and he'll be able to walk through the attached packet that's available on the website and our copies available for members of council tonight.

And then in conclusion, if you would turn back to me, I'd like to just make a couple points on why we feel it's important that 20 summer of 2026 is the time to be doing this versus the past years.

We've been together with Litzcott in 25 and 24, 23, 22.

And to talk about it and really get a feeling of when would it make the most sense for if at all, when would it be best for the City Bethlehem to restructure its existing debt?

For decades, the city of Bethlehem has borrowed five to seven million dollars every other year in order to fund capital expenditures.

In addition, several supplementary borrowings were incurred for a host of other reasons.

As a result of borrowings, the city's total debt climbed to 171 million by the year 2015.

Since that high water mark, the city has not needed to borrow for any reason outside the planned biannual capital borrowings in 2015 on 2017 and then 2019.

The city has not borrowed for general fund purposes since 2019.

Due to the pandemic, the budget hearings in the fall of 2020 carried great uncertainty, and the city deferred 2021 capital investment decisions for a year.

In 2022, the city used reimbursement from the last revenue provision of ARPA to invest 9.3 million dollars into capital needs, which covered 22 and 23.

That second step was taken in 2024, which covered 2024 and 2025.

In 2026, the city allocated 22 million dollars to fund capital needs for four years, which is 2026 through 2029 by using 10.7 million from a capital reserve account that was established in 2021 and built by setting aside extraordinary revenues and 11.3 million dollars from cash reserves, which had grown incrementally through small annual budget surpluses over the last 12 years.

So from that high water mark of 171 million dollars in 2025, the city's now reduced total debt to 77 million dollars in 2026, a reduction of 94 million dollars.

The reduction of debt has improved the city's financial position, and we're now interested in restructuring the remaining debt.

Our capital plan is funded for the next four years, so there's no request for additional funding at this time.

Rather, the request is to smooth the remaining annual debt service with step downs in order to improve the city's financial flexibility and make the balance balancing the budget process uh more sustainable in upcoming years.

So having said that I'll turn to Mr.

Sher for the presentation of the proposed restructure.

Thank you.

Thank you for your summary.

Mr.

Sheer, if you don't just mind introducing yourself to anyone present or watching who may not be familiar with who you are.

Scott Shear with Public Financial Management or PFM Financial Advisors been working with the city now for about a decade or so.

Um, when it comes to the debt issuances and the things along those lines.

So good to be back before you this evening.

It's been a little bit.

So I will be reviewing the handout that I believe you all have in front of you that looks like this.

So again, that was a great great summary of the city's outstanding debt.

Maybe before we kind of get into the nuts and bolts of the restructuring plan, I would kind of like to start out with sort of the state of the market, if you will, and that's on page two of the handouts.

We have a couple different charts on here, but we'll focus on the middle one and the bottom one.

The short story is whether you look at say the past year or two, or whether you go back 20 plus years, we're basically at historical average, maybe just a little bit um a little bit better in some cases than historical averages, and that's what the bottom chart on page two just goes back to early 2025.

And this is a 10-year municipal index.

So it's not exactly where the city would be pricing, but it's a good proxy that we follow for our municipal clients to just kind of gauge where interest rates have been.

So again, the bottom chart, let's go back to January 25, and it shows that the current rate for that index is a 3.02, and the average has been about a 2.97.

So again, pretty close to historical averages, and then the one above that there in the middle.

Again, same index, 10-year index.

Um, that again we use as a proxy for all of our municipal clients.

And this one goes back now to the early 90s, and you see again that rate's a 302, and the average has been you know about a 3.2, so a little bit less than the long-term historical average.

So, from the perspective of looking at potentially restructuring a portion, not all of the cities outstanding yet, it's just a kind of a small portion.

We're you know, at good uh big good rates.

Now, as you're probably watching with maybe some of your own investments, or if you're looking at refinancing mortgages, markets are fairly volatile with everything going on internationally.

So, you know, we see fluctuations on a day-to-day basis, but at the moment, we don't see anything that will sustain any kind of rate increase.

We're just I think gonna keep seeing the ups and downs depending on what happens uh you know on the day-to-day basis.

So that's kind of the state of the market.

On page three, we kind of get into the proposed financing plan.

And Mr.

Edward mentioned point number one, you know, we've been looking at this now for quite a few years, planning, seeing when the right timing is, uh, and looking to improve the financial flexibility in the future years.

So then a point number two, what we're targeting are four of the outstanding issues that pertain to the city's general fund debt.

I kind of looked at a look at it that you have general fund debt, you have some sewer debt, you have some water debt.

Um, but as we heard, there's not been a general fund borrowing, if you will, since 2019.

So it's been you know quite some time.

So those are the four issues that we're looking at there in point number two.

It's series A of 2017, Series B of 2017, series E of 2017, and the series of 2019.

So we're looking to restructure the most efficient ones, um, you know, that that we can.

And again, what this will do in 2A is it achieves the city debt sort of subjectives basically for the next 10 years from 2027 down through 2037.

Um, now there's still a fair amount of work we need to do with city bond council to just make sure we're all within the kind of four corners of the different legal documents when it comes time to look at the useful life and other IRS tests that we do, but we should be actually fine.

Those are some of the next steps we're going to embark on you know as we move forward here.

The other thing just to kind of keep the process moving, and again, Mr.

We'll talk about timing.

Um, is we have already sent out underwriter RFPs.

So just like in the past, uh, we bid out any kind of financing that the city does to make sure you're getting the best overall rate.

Um, and we're we'll get those results back here in a week or two, so that if we do continue moving forward, we'll be able to share the results with you at the I believe it's August 4th meeting.

We have the timeline in here.

So again, it's non-binding.

Um, it just gives us that indication of where the rates will be for your proposed transaction.

Uh, and since the city has not done uh a borrowing for quite some time, basically the key thing that we need to do, and we'll talk about a little bit more in the timeline there for the end of this presentation, is we will need to consider and then ultimately adopt a parameters ordinance, and that's the least thick legal document that your body council review and the solicitors will review.

Um that kind of has all the legal information in there, but at that point convince the city to move forward with the refinancing and the restructuring, and you'll see we call it a parameters ordinance because there's going to be I'll say higher than what you're going to get interest rates, there's going to be a higher dollar amount in there.

It's what I would say now, basically 99% of the issuers do in Pennsylvania.

They do this parameters ordinance as opposed to what I'll call a traditional ordinance.

What that means is if we were to do what I'll call the traditional ordinance, we would have to come to you the day of your board meeting and actually price the bonds that day.

So board only meets once a month or twice a month.

We have to be in the market that day.

The parameters ordinance gives the team more flexibility that we can price the bonds a week after you have your meeting or two weeks or three weeks, or you know, even the you know the next day, but we don't have to coincide with just one or two days per month.

We can hit the market when we think that you know it makes the most sense.

We're not we can't time the market, but we do know when there's and some bad times to stay out.

So again, it just gives us that flexibility.

Uh and we'll talk more about it as the meetings continue.

Uh, but that's you'll hear more of the terminology and the parameters ordinance that ultimately will need to be voted on if you want to look forward.

The next page, this is this is not all of the city debt, this is just the general fund debt that we're seeing on this page.

Um, and you can see over in the far right hand side of column nine, goes out to show the geobond series double in 2019.

Again, we heard that's the last time that the city had borrowed for its general fund.

The four columns that we have highlighted in yellow, those are the ones that we're targeting for the restructuring.

So it's columns four through seven, uh the 2017 A's and E's and 2019.

And you can see if you just kind of go down the yellow a little bit to where it says a call date, and the call date June 1, 2025, another one, June 1, 2025, 12.125 and 51.4.

So those again are the efficient ones to be restructuring because we're actually past their call.

Um, so again, it makes makes things just a little bit easier, a little bit more efficient uh when it comes time to uh retiring the portion of the bonds that we're gonna be potentially restructuring.

So again, this just gives you the idea of what we're looking at when it comes time, you know, when when we're looking at it holistically with all the city's general fund, then next page is probably the most important.

So this now puts basically everything in perspective.

So at the top of page five, in that kind of first box where it says settlement October of 2026, that's when we're assuming the transaction closed.

We're looking to issue about 11.7 million dollars, and then um you can see in the couple boxes below there for each one of the bond issues that we're restructuring, how much we're restructuring and how much is remaining.

So, for instance, the 2017 A, right below there, it says the restructured car amount, we're restructuring about 8.6 million, and so there's about 435,000 left.

So that over restructuring the majority.

The 2017 B's, we're showing we're structuring about 1.1 million, and what's left is about 2.5 million.

For the 2017 E's, we're restructuring about 1.7 million, and what's remaining is about 5 million, and then for the 2019 bonds, we're restructuring a little over half a million, and what's left is about 2.88 million.

So again, we're not restructuring all of those, we're trying to keep it as efficient as possible.

And so then what this means from a budget perspective, if you go down just a little bit further to column three, where it says the existing general fund debt service.

So right now there's a couple years in the 10 million dollar handle, then it drops down to 9.3, and so on and so forth until uh 2035 where the debt disappears.

So now if you look in column seven, after we do this 11.7 million dollar restructuring, now column seven is what the new debt service will look like.

So now in column seven, you see 2027.

Now you'd be paying about 9.4 million.

Year after that, about 8.9 million, and about 7.9 million, so on and so forth.

And to the right, column eight, that's what the city's uh administration objective was to try to hit those OEs.

So we're coming in you know extremely close to what the debogees are.

Um we'll try to fine-tune the last year a little bit, but that's something we can pick up in later years as well.

But that gives you an idea of column three is what the current general fund debt is, and then column seven is what it will be the best-timated rates I'm gonna do right now after the transaction is completed.

Another way to look at it is in the bar chart below, or the black dotted lines is the existing net service for each of the respective years, and then the bars is basically what it's going to look like after the transaction.

So that weight space between the bars and the black out of line, that's sort of the free dump capacity that uh that we're showing.

Um whenever you do a debt restructuring, because we are kind of taking some of the short-term debt and pushing it out a little bit.

There does it does come at a cost.

So what we're showing at the bottom of column six or the present value cost of about $800,000, and that cost again is just from the interest rate perspective.

That does not factor in, I'll say some of the other benefits that the city may be utilizing that free of cash from over four.

So that's just the present value cost of doing this doing this restructuring.

But again, provide uh additional cash road relief.

Um, that the city could use for other purposes, and then lastly, on uh page six is the tentative timeline.

So here we are uh this evening for the initial uh presentation uh what we'll be doing that is starting to draft some of the financial documents and legal documents, start chatting with the rating agency August 4th.

We could come back to the first reading of the parameters ordinance.

Uh early August would be the call standard report for the agency in the region of the city.

Uh August 18th would be the second reading of the parameters of ordinance.

We would receive the credit rating shortly thereafter, finalize all the documents and then probably price sometime maybe a little bit after Labor Day so that we can then close mid-October.

So before I turn it back over to Mr.

Evans for why the timing of all this, happy to answer any questions that you may have with the numbers with the concepts.

I'm gonna let Mr.

Evans wrap it up and then I'll open it up to questions for you or Ms.

R.

Thank you, Chairman.

I would just ask the committee to make a turn back to page four of the presentation in my comments, so most of them will be illustrated on page four.

As I said, we've been contemplating this plan for several years.

We've been publicly vocal about it during financial reports and especially during the budget hearings.

I know I have some several slides on talking about the opportunity last fall.

Uh, while we're waiting for the most appropriate time to execute, we feel right now is the right time for several reasons, and referring to page four.

Number one, there's significant debt that's now callable, it's eligible eligible for refinance.

A couple years ago, that wasn't the case.

Uh Mr.

Sherry Claire.

Number two, interest rates have dropped since that 23, 24, 25 period.

They're at favorable to not a perfect terms, but they are they are favorable.

Uh, number three, the current structure of a debt service, which is uh what I call tabletop, it's flat, it has been flat.

We've been chopping it off at 11 or 10.8 million dollars from number years in a row, followed by steep drop-offs.

If you look and into the year 2033, you know, we're paying 10, 8, 10, 8, then it drops from eight, then down to five.

There's a three million dollar drop, and while someone waiting in 2033, that's gonna be wonderful for budgeting purposes.

I think it's much more efficient to have a small or incremental drop each year and have that spread out through time than versus having to work and make ends and then have a three million dollar um some eight years out, followed by another flat year.

So uh this would make it much more flexible and efficient for budgeting.

Um, there's a piece of debt, it's actually in column number two.

The general obligation bond series B 2013.

There's a payment of eight hundred and seventy-nine thousand dollars that's being made this year in 2026.

That represents 1998 landfill debt that was refinanced in 2013.

Could you just say again what were we looking?

Uh, column two on page four.

Yep, there's a remaining payment in that see the bond of 2013 at 880.

Last payment, and that represents landfill debt, and under terms set 28 years ago, the sewer fund has and is paying for half of that.

When you think about, I don't have it in front of me, but uh uh on page maybe three or four of our budget book, we have four hundred thousand dollars of revenue that show up as revenue and says from a transfer from the sewer fund that pays half of this landfill debt next year.

When this is gone, that we're not gonna take that transfer.

That's good for the sewer fund.

It's four thousand more for them.

This debt will be gone.

But if you look to the far column on the same page, column 10, you'll see next year a debt service does not change it, it remains at 10.8.

So when our debt services structure, we lose 400,000 to the general fund in terms of a revenue source, but our debt service hasn't dropped.

So what's happening is it's creating a 400,000 structural deficit in essence in the general fund.

So if that fund goes that debt goes away, the transfer goes away.

Ideally, the debt service should have dropped that amount, but does not.

So we do that's not while we're doing this, but I think it's another incentive that this would be a good year to do that.

And number five, uh, I'll point out that this is not a one-year stop gap.

It's not a refinance that gives us some instant relief only in 2027 and then goes away.

The way it's structured, and in this case, I'll point you to page 12 to our city objective is to give us incremental lead relief in 27, 28, all the way out till 2037.

You'll see there's continued, it doesn't stay flat, but it delivers drop downs each year, which will give this and future administrations the ability to absorb other costs.

There will be future debt needs or will be borrowings at some point in the future for whatever the purposes may be that would be brought to city council at that time.

But that's that's the intent of column eight on page five.

So for those reasons, we think it's uh this is a good proposal for these reasons.

We think this time is the right time to execute on the proposal.

That's my comments.

Thank you.

Thank you, Mr.

Evans.

Thank you, Mr.

Shear.

Before I open it up to council, I will recognize our controller, Mr.

Yalso is here.

Is there anything you want to share, Mr.

Yalsa?

No, I uh spoke to Mr.

Evans about this and I viewed it already.

Uh you can start for 10 minutes.

Thank you, sir.

So I'll open up to our committee members.

Councilman Queatext, I'll start with these.

Thank you.

Um, thanks so much for your presentation.

And um keeping in mind that um most of us are laymen when it comes to this stuff.

So forgive me.

Um, but if we look at page five and we're looking at the um columns that you were drawing our attention to, three and seven, um, and then you know, you took us down to this bottom line PV savings slash cost and said that ultimately the the net cost of this is eight hundred and eleven thousand dollars.

Um I guess um um oh I that confuses me because there's like four million dollars more in the estimated overall debt service in column seven than there is in the existing debt service.

Um, so by by um restructuring and pulling this out over a longer period of time, it looks like it's more than $800,000.

So if you could just explain that to me in layman's terms of it, no, you bet good question.

Um so you read it absolutely correctly.

So maybe if we look at column six, so column six is the estimated net debt service savings kind of per year, you know, savings or cost.

So you see in column six that for a bunch of the years, um their savings that were decreasing the debt significantly in those years, and then in those out years, there's an increase because we're pushing some of that shorter term debt out longer term.

Now it's still very crude because we're only pushing out all total out to 2036 at the last date.

Um, but we are in fact still pushing some shorter term debt that we're gonna show the longer term.

So then the total in column six is you know, close to the number you mentioned 3.9 million.

So that's the I'll say the future debt service impact, but then when you use typically kind of the financial world that we're in, we look at things on a present value basis basically, taking that four million dollars over time and present valuing that back to today's dollars, and that's what equates to the 811,000.

So to your point, it is good to look at both, both on a future value and present value number.

My point was that I just want to make sure everyone's clear that by doing this, you are definitely getting cash flow relief, and sir pointed out it's a nice step down, easily manageable.

Um, so there's a cash flow relief, there's the step down that's prudent, but there is still a cost, overall cost of doing that.

So I just want to make sure that I said that that was clear and it was understood.

But but again, we look at it from a future value basis, which is that four million dollar number and the present value basis as well.

Okay, that's just taking future dollars and putting it more into today's dollar amounts, if you will.

Okay, um, and this is this is the total debt service, this is not just the ones that we're restructuring that we are looking at the full picture.

Full picture because when you look at those last three years, it is only this restructured debt because of course we were going to be debt-free by that theoretically, although we probably have to borrow again.

Okay, um, I I guess I was surprised when you say present value.

So we're saying 10 years from now, $811,000 will really be almost four million dollars in terms of like when you say present value.

Yeah, the four the four it's four million over time, but when you present value that back to today, we put it in today's dollars equivalent to about $800,000.

Regardless, it's still a cost.

Right.

I guess it just seems like a big increase over 10 years in terms of overall point we'll take it.

I say overall, this is so you know, we work on a very large amount of transactions across the country from a debt restructuring standpoint.

I would say this is probably one of the most efficient ones that we're doing just because of the short nature of it, um, is keeping that cost down to well, what I'll call and and I mean for what it's worth this you know that the debt service will be half almost less more than half of what it is right now at that point.

So it's it's still um a much lower debt service than but not lower than zero, obviously.

Yeah, I would say so.

Whenever we talk to a client having discussions about debt restructuring, you know, we we don't look at it in a vacuum recital, we kind of look at sort of what's going on holistically and kind of looking at the past of the city as well.

The city has a very good credit rate, um, and that's been brought upon by good fiscal discipline over the years.

Um that's where you know I'm extremely comfortable with this kind of transaction, just given sort of again the fiscal discipline that the city has shown, you know, say for the past handful of years, uh, and paying down the debt that Mr.

Evans talked about early on, going from or 375 million to about 77 million, huge decrease in amount of outstanding debt.

Um, so that's where in all the discussions we've been having and the scenarios we've been running, none of those ever gave me pause because of the the good financial position that the city is in.

We have seen, like I said, other cases um where the numbers are much more magnified and the credit rating is much lower.

That can cause some concern, but here completely different picture.

And your mention of the um credit rating is led me to my uh one of my other questions, which is we are in a very good position from a credit rating standpoint, so you feel comfortable that we'll be in that range in terms of our the interest rate that we are able to lock in and yeah.

I mean, as far as the credit rating itself, you we're gonna have to go through the process, and I don't high level items foresee any changes in the rating.

But I do know that this transaction on its own will not impact the credit rating in a negative way.

They're gonna look at a lot of things related to the city, but everything that I've seen and heard and read cities in kind of very good shape, so again, we would expect a very similar rating, which then coincides with similar interest rates that we're showing or that we have in the models that feed into the summary.

Excellent.

Um so what we're looking at here will be lower annual payments, um, but not a lower total financing cost, right?

That's a fair way to put it bottom line.

Okay, um, so that's budget flexibility, and that's kind of what we're shooting for on this.

Correct.

Okay, thank you very much.

Thank you, councilwoman.

Any other questions from the committee?

None for me.

Thank you, Councilman.

Thank you, Mr.

Amy.

So just a couple of quick questions at the top of page five.

You had already gone over, we're not restructuring each of these uh in their entirety.

There's the restructured amount and then the remaining.

Can you just give us some insight as to what goes into the process to decide how much to restructure and how much to remain?

It's to kind of twofold.

It's what the interest rates are that we're refunding, you know, are we going from a higher rate to a lower rate, or is it from an existing rate to higher rate?

So that factors into it, but then it's also what we need to restructure to achieve the city's objectives.

So if you go back and stay on page five and looking at column eight, that was basically the city administration's objective that kind of hit those bogeys in each one of those years.

So that was kind of one of our other targets of you know how much do we need to restructure of those other bond issues to kind of hit that target.

And so the good thing about leaving those other bond issues, you know, the rest of the bond issues outstanding is if rates would happen to drop six months from now, two years from now, we could go back and refinance the the remaining part of those four issues that maybe achieved savings, but not a cost, but a saving at that point.

So we want to keep the transaction size still minimum.

Um it just does the city know good to refund all of them now, do a bigger deal and present cost, future I often just be greater, so we keep it to a minimum what's needed to achieve the overall city and then leave that flexibility and optionality to hopefully cheap savings later in the future marketing condition.

Understood.

Thank you.

And then I know these are all just estimates, and so you go out for pricing, but we're confident in coming relatively close to these.

And if we see anything changing, we said I'll be back on August 4th for an update.

Um, keep your administration up to date.

We see anything changing deviates from this, you know, significant item for seeing that.

Thank you.

And then just two questions from Mr.

Evans.

Mr.

Evans, you said we haven't gone out to borrow since 2019 in your current models and forecasting.

Obviously, this is to control some of what our annual debt services.

How long I just want to ask this in a way because I don't want to put you on the whole deal to anything.

Do we have any anticipated borrowing currently?

Eventually, the city's gonna have to borrow money again.

I think it's fair to say at some point in the next my lifetime, he's probably gonna have to, yeah.

But I'm just trying to, as we look at what we're saving, I'm just trying to, and if it's uncertain, that's a fair answer.

I'm just trying as we talk about refinancing debt.

Do we know how long we can hold off on taking on new debt?

And yeah, uncertain is the word for that.

There's nothing certain at this time that's lined up and prop, but as initiatives and plans evolve, we of course would come to councils quickly as soon as we would ahead of time to let you know.

But I think what this sets you up for the step down model, because I've been around for refinancing that took place with Mr.

Sharon and even a little before that when there might be a restruction that saved money for the next year, and that was kind of kind of like a trampoline effect.

Say one seven comes right back to where it was and stays even, which we we could do that, you know, and have maybe less of that present value cost to it, but I think the flat we're purchasing some flexibility to our balance sheet by having that drop down that gives space for whether it be increasing health care costs, whether it be you know future debt issuances, which will be there because what you know, we also have to remember what what's happened the past couple of rounds has been unprecedented as far as we can go back to know the city has not borrowed, it's always been every other year.

But there's a testimony for 30 years worth, right?

To my right side, and as far as you go back, there's been and some in between that, not just a biannual for capital purchases, but other things that come up along the way.

We've had two or three two two to refill a pension um MMOs or to lower pension MMOs, we've added um it was back to eight.

There was, yeah, there's a lawsuit settlement.

There was one in 2012 that was to pay off now 20 million dollars in accrued expenses that happened after the housing crisis that had to be squared up.

So those come along that you know from time to time that weren't really predictable from those administrations as as time moves on.

But I I think doing this gives us a flexibility to meet any or all of not all of those, I guess all of those challenges that remain in front of us.

Some we may not be aware.

Thank you.

And I think one thing worth mentioning.

Sorry, I've been discussing alluded to to open Mr.

Evans that are at a high the city's debt was about 171 million.

Yeah, and currently it's at about 77.7.

Correct.

So I just think that's for the record, anyone watching.

We've come a long way from 171 to currently 77.7.

And to councilwoman Quiet's point and Mr.

Shearer's answers, yes, this kind of this raises that because we're stretching it out, but a dollar today is always worth more than a dollar tomorrow.

So it's not necessarily fair to say, okay, I'm looking at a bigger number so many years down the road as we as we equate that, but still to go from 171 in yesterday's dollars to 77.7 today.

That's a big deal.

So I just think that's worth mentioning.

The last point I want to make, or not the committee's not voting on anything as it relates to this tonight.

There will be a communication coming out, Mr.

Evans.

Correct me if I myspeak.

So there'll be a communication coming out for the next agenda for the parameters ordinance, correct?

Mr.

Chair, yes, yeah, yeah.

The plan is to work to develop the parameters ordinance.

So there will be a vote requested uh at the council meetings of the fourth and the 18th of August.

So the first and second reading of the order.

But for the purposes of the committee, I was just we're not voting on anything tonight.

Nothing voted tonight, and this as Mr.

Sherrod noted, he'll also be back when the full council.

So those that could not make it tonight to the finance committee.

If there are any additional questions that are spin-offs, but still need to be answered, he will be here as well.

I guess the question I have that can be answered now or when we get to first reading.

So in the parameters ordinance, what's sort of the the I know you're looking for that sweet spot to put it in plain English?

What's the latest you could go before you refinance?

Well, I think we would like to do it.

We want to try to stick fairly close to this timeline because I think the goal is to try to get that known number for the debt service for next year when it comes time for the budget discussions.

So could we go a little bit later?

We could, but I think ideally we would like to have things wrapped up according to the timeline so that it's known for the budget presentation that are yeah.

When we build that budget, which is mid-October, like now we're going to have to start balancing it.

We need a firm number to talk to Scott about timing and backed into it so we sit here before you tonight.

Is that if the pricing and everything goes and they go to mark and we come back and we have a number locked in that we can put in that number, exact one.

So we are officially balanced that budget time now.

A couple hundred thousand dollars is a big difference.

And uh we want to make sure we hit that mark.

We have a little flexibility in here because we're showing pricing say mid-September.

So when we price the bond, that's when we lock in the rates.

So then at that point we know what the debt service is going to be, but the transaction does not close until about a month after that.

So the kind of critical date, I think, for the administration standpoint from a budget perspective is when we price the bond, meaning lock in the reads.

So we you know we have maybe a maybe a month, a cushion or so in there.

Um typically the after labor day, the investors are back in action.

Things get a little bit slower in the summertime from the standpoint of selling mutual bonds, and then like it's around labor day or shortly thereafter.

You see things get back up again.

So assuming there's no major international crises out there, we would expect it to be just quite the assumption.

It's it's quite the subject, but you know, yeah, we'll just keep you up to date as we get closer to that time.

Thank you, Mr.

Shear, for your time.

If there's no other questions from council, we'll move on to agenda item two.

Again, that was just for presentation, we're not voting on anything.

So we'll move on to agenda item number two.

Now, what we could do, I see Mr.

Alcall here, Mr.

Alcall, Mr.

Evans, Mr.

Sarchek.

If we just want to, because they're both related to the Green Light Go program, the ordinance and the resolution crack.

Yes.

Do you just want to go over both of them together?

And then council open up to questions for two and three together.

Mr.

Alcall.

Well, after the uh 2026 budget was prepared, uh we were successful in requiring two uh two grants under the green light go program.

Um grant was to replace all the modules, essentially displays the LED lights on all our traffic signals, all 128 traffic signals in the in the city.

Uh we had upgraded those 15 years ago, and now they're needed with replacing the other grant was to replace the components or the computer systems in all the uh controllers, uh the cabinets that sit at the corner of each of those intersections that essentially operate the signals and uh program the for the phasing uh to manage traffic.

The total project cost is 78,000 and change, of which 20% is a required match uh from the city.

Uh so item two is to establish the line item uh in the 2026 budget identifying all the where all the money's coming from essentially the two grant and select the money from the city to match the grant, and item three is to transfer the funds from where we're getting the match, which is from savings that have been realized in the Bureau of Streets engineering as a result of patricies, and found about 141,000 king, and that's what makes up the total.

Thank you, Mr.

Alcall.

I'll open it up to the committee for any questions about agenda items two or three.

None from Councilman Queatech, none from Councilman Amon.

I just wanted to restate you said it's a 20% match from the city.

Correct.

So 80% of the total project is paid for with grant funds.

Thank you, Mr.

Alcall.

I will accept a motion.

I'll I'll start with agenda item two, the capital budget for non-utilities adjustment for the green light go program ordinance.

I'll accept a motion and a second to move that on to council.

Second motion by councilman Quyatech.

Second by councilwoman, or excuse me, councilman Aman.

Apologies.

Please call the roll on the motion, Ms.

Miller.

Mr.

Ringman.

I'm squeeze.

And Mr.

Cologne.

Motion passes three zero.

I also ask for a motion followed by a second to move general fund budget transfer green light go program resolution to full council.

So moved.

Second.

Motion by Mr.

Amen.

Second by councilwoman Queatech.

Mr.

Miller, call roll.

Mr.

Angman.

Ms.

Quech.

Hi.

Mr.

Cologne.

That also passes three zero.

Those pieces of legislation will be placed on tonight's council agenda.

That concludes our finance committee meeting.

Mr.

Miller, did you want Mr.

Evans?

Excuse me.

Did you want to share something?

I had a mid-year report that was delivered.

Can I run through that quickly?

Yeah, yeah.

So the so what we voted on will go on tonight's council agenda, and we have some time.

Ultimately delivered by Mr.

Alcohol.

So we'll get it done.

I'll move this through and of course take questions at any time, either after at the end of my report or after or by at full council tonight.

Uh on page one, I is an update on our revenues.

We we looked at the ones that are the most I guess our largest leading indicators with regard to revenue.

So at the top lit up in the blue right now for all three slides, one, two, and three are the same, but it light up blue and look at what I say large and consistent revenue streams.

Our largest by far revenue stream for the city is real estate taxes.

And you'll notice in the first column is last year at this time we had 33 million dollars.

Most of the taxes are collected either at discount or the some small amount through installments, which are also well underway.

So you can see in light blue, we've collected 96.7 percent of the total.

The budget was 34.8.

This year we collected 33.7 million dollars.

Uh that the budget was a little higher.

So last year we collected 97%.

This year at 96.5%.

So that's why I say it's large, but it's also very consistent in uh the way it arrives into the coffers.

Host fee is another large but consistent revenue stream.

We get quarterly payments, so we had 4.9 last year.

At this time, I'm circling it now.

Uh to the right, this year we have 4.93.

So we're at 49.8 percent last year and 49 percent or nine point eight percent this year.

It doesn't grow, but it's it's a consistent arrival.

Yeah, in the center, the next page are the act 511 revenues that's earned income tax, deep transfer, the tax collected when houses, uh LST, local service tax, and market top.

You'll see at EIT is at 6.5 last year, this year it's 6.6.

It's up a little bit.

Uh for several years, it was moving up at a much higher percent, it's still increasing, but not at the same percentage it once was.

Last year's budget was 11.9.

This year we moved it up to 12.5.

So we did increase it by 600,000.

Last year we're at 55 percent of the budget.

This year we're up 100,000.

Uh, it's 53 percent.

So at the midpoint, we're over halfway there in arrival, and this is a cycle becomes pretty steady throughout the year.

So we're we're in good shape for the 2026 budget in DIT, which is as you can see, one of our larger revenue items.

D transfer is one that is a little slow.

One of the reasons is we have two counties, Northampton, Lehigh County in the city of Bethlehem.

Northampton is a month uh behind, delayed in receipts.

So if another month is added, this might jump to 850 or 9.

I would point out it is it is lower than last year.

Last year we had 1.1 by this time this year.

Once that payment, which will arrive, and we'll start to catch up on that.

That's just a timing issue, but it'll still below 50%.

So we're gonna watch this one closely.

We did move it up from last year from one nine to two.

So that one's uh a smaller line item.

That's only I would say only, but it's two million dollars compared to the 12 order to 33, but there's still maybe an impact on the revenue side.

LSD was 995 last year, it's 988, so it's it's strikingly close to what it was last year.

It's 53 percent of the budget last year, it's 51 percent year to date at the six-month interval because our budget we did move it up 50,000, but we feel we'll make budget on that, and then one that is uh the last one uh five level markets 3.2 last year, which is 99.

This is not coming all throughout the year.

It's a heavy by May.

We have almost all of us that you could see.

We had three two.

We had three two, we're at 98% budget last year, and this year at three at 91%, we're at 3 million out of a 3.4.

You'll see from 3.2, we'd eventually reach 3.7.

So another 532 came in by mid year, another 500,000 was gained by the end of the year.

So if we could assume we'll collect again around 500,000, this will put us at 36, which will be over the budget of 3.4.

Other revenues, uh EMS is a large one at 2.1.

This year is just a little over that.

So last year we're 54% of the budget at 3.9.

We increased at 300,000.

So it's uh right right around 50% of the budget.

We feel when we EMS and interest investment.

Last one to highlight last year's 900,000 dollars, interest rates have lowered.

So our revenue of interest investment 900 last year is at 700.

A good thing about this line item is we knew interest rates were on the downward move.

So last year the budget was 1.1.

If remember at budget time, we lowered it, which is a painful thing to do, but we we lowered the budgeted revenue down to 750.

So we're at 698, and we will be able to make budget rather comfortably and make up for any shortfall and in de transfer or even the mercantile area.

So overall revenues are good.

Real estate uh studies are steady, EIT is is fine.

The transfer is a little light, but investment interest is is strong.

Other expenses of note, salaries are by far our largest.

Let me talk about expenses at 44 million dollars.

They're calculated at the beginning of the year, and savings uh we don't go over in salaries of anything that's gonna be lower because when seats are empty when people resign or terminated for any reason, the seats is empty till it's filled.

During that time, uh, those salaries sit still and salary savings will accrue.

So we always have vacancies throughout the year, whether it be the police, fire, public works, uh, community development that accrued into the hundreds of thousands, is not by design, but it's through actual functionality.

So that's something that uh will continue to grow throughout the year.

Uh the other large expenses we have of pensions, which is 13.3 between police fire and PMRS, 13.3 million and debt at 10.9.

Oh, they'll although they are very large at 25% of the overall budget, they're set and they're known.

We know what the debt will be, we're paying it, and those MMOs will be paid in the coming months, and those are also set, so there really can't be surprises there.

Small accounts, but ones we're watching as we talked a couple months ago, Mr.

Calendy brought the idea of uh the question of gasoline.

Last year it was 249,000.

This year we're up 50,000 to 290.

We're still at 47% of the budget, so although it's increased, the budget was moved up accordingly, and we should be okay with regard to the budget gasoline.

Electric is running a little bit higher last year at 315, and just might much like you might see your PPL bills at home.

I know I do, uh, they do increase.

And the last year 315, this year at at the midpoint was uh 411 or 65 percent of the budget.

Uh, our medical and workman's compensation are both running uh very hot for the first half of the year.

I'll turn to the next slide and explain.

This is our medical spend on page five from 2020 to 2025.

So you'll see an interesting dynamic as it grew from 20 coming out of COVID, like most expenses and activity grew to 2021.

People started going out and having appointments and surgeries and hospital visits again, and 22 grew to 14.

This was all expected.

The nice surprise was in 2023 when we really moved back to 12 million dollars.

You don't see medical going down much, but we are self-insured as we've often talked about.

We do have stop loss insurance.

If there's an individual that hits a limit of 245,000, we have insurance that covers that, so we're not exposed more than 245 to any individual.

So in 2023, it held that 12 million.

At 2024, it stayed flat again.

In 2025, we saw a small increase.

This next page on page six is what we've been budgeting from 2020 through 2026.

You'll see as the expenses went up, we moved our budget up.

And as when it came back a little bit, we weren't real quick to move it back down.

We felt felt it was conservative to hold it steady.

And when we enjoyed the second year in a row of 2025, we held a steady, and again, we saw a little growth in 25.

Our decision in 2026 was to hold stay, not to back it down because it can move up.

The next two slides I'm going to show you are medical through May, not through June, but through May 31st.

You'll see through May, the actual expense of medical went from three, four, five to five point one twenty-two.

Just like I showed you the year end drop.

The 531 mark of 2023 was 4.5, 4.6, and 4.9.

Nothing here that jumps out.

That's why if remember when we budgeted up here, we kept that up.

I think it might rebound, and it did, but it's this year surprisingly high.

Although we've had the surprise of a couple low years, this year is doing uh the opposite.

So look at the trend now from 2021 22.

The 23 was a surprise only went backwards.

The small growth was a surprise of how much it grew.

One might have expected it to be able to be here and here, but it was at the 49.

And throughout this year, early on, this was no set.

As we said, we have stopped, so it's not one single catastrophic loss, it's just a collection and it's a series as a momentum of claims that have come in from January through February.

We knew by March, we get billed every month, so week to week we can see this one's high.

Uh, we I think when it comes up to anything over around 230, 40,000 a week.

We start to go, okay.

This is higher than expected.

And we're seeing medical bills of over 500,000 uh for a week, and that went on for several weeks.

It's not any, it's just uh you know the way the way things work, and now since this May and June and into July, it has cooled off a little bit.

So as we continue to track this, I think the cons the major point here is just to put it on the put a marker down that medical something we're gonna talk about at budget season.

It's too early to know what this might look like by the time we get to August, September, and we need to make decisions about what the budget's gonna look like, what we place at number, but it is um strikingly high.

We've had meetings with BSR medical broker, and they've had meetings with Capital Blue.

Now, one thing that happened, you'll notice the note at the bottom, there was a billing.

I guess I would call it um lack of coordination between capital and St.

Luke's.

St.

Luke's was had the medical bills, and then when they submitted capital capital the way they received them, there was an issue across the hat valley with this.

There's $500,000 of bills that were accurate and credible bills that we didn't receive until 2026 started.

They were services provided in 2025.

If we would have known it may have been too late for budget season, but would have pushed 2025 higher.

So it's a little high if if you take out that one-time adjustment, we're still at 6.5, which is still very high.

It's a little bit of a change, but doesn't it doesn't change the fact that uh we're gonna need to um you know watch this close and have some type of recommendations ready for budget season?

So I think uh when when you look at this last slide, this just shows you it's an overlay.

This is the in the orange, the final year where we ended up.

The blue is where we were at 530 or May 31st.

So you can see where the blue is this year, and it's much higher than any other year.

So it's food for thought on that.

I think that that's all I just want to provide with you.

The high takeaways.

If you have any questions about revenues expenses, um, please senior call me time.

Thanks.

We we do have two minutes before I want to adjourn.

Does anyone on the committee have any questions for Mr.

Evans related to the update that he gave?

Thank you, Mr.

Evans.

Just a point I would make on a question.

When the Act 511 taxes, that's all on the city's website.

So sometimes we talk about taxes, everyone thinks real estate taxes, but anyone following along, it's in our budget book, and then they're explained and broken out on the city website what the different taxes that come into the city are.

I think it's just a good point, even sometimes for members of council, myself included, as we're a fresher about where we get our revenues from, how that money's generated and what comes in to help fund the general fund.

So that was the point I went to make.

Thank you.

Thank you, Mr.

Evans.

So this concludes the finance committee.

The full council will be starting at around seven uh scheduled.

This meeting is adjourned.