On our agenda for this evening, we have two items.

The first is a discussion of the 2026-2027 budget, which is currently under development for approval in June.

Second, we'll be discussing the townwide Hallmark program.

Before we get started, we just want to remind our audience that the format of a work session is different than that of our business meetings.

Work sessions are an opportunity for the council to dive more deeply into specific topics.

These meetings are more conversational and less formal, and we do not vote during work sessions.

The topics will come back to a formal business meeting for a vote if needed.

Finally, we value public input and we do want to hear from the public on these and any other topics.

There will be opportunities for the public to speak at an upcoming business meeting if a topic comes back.

And our next regular meeting will take place this Wednesday, March 25th at 6 p.m.

in town hall.

Another good way to give us your input is to email us at Mayor and Council at ChapelhillNC.gov.

I remember you having your email address.

I know.

Okay.

Item number one is our fiscal year 2026-2027 budget.

Okay.

Good evening, Mayor and Council.

My name is Amy Ollins.

I'm the town's business management director.

We are here tonight to begin discussions on the development of the fiscal year 26-27 recommended budget.

Our goal for this evening is to give you a clear look at where revenues are trending, where our cost pressures lie, and how staff is preparing recommendations that support our core service, our workforce, and your strategic goals and priorities.

So tonight we'll begin by taking a quick look at how we build our base budget.

Then we'll talk a little bit about how our budget is focusing on council's goals and strategic priorities.

Next, we'll look at the revenue projections that are driving what we can fund in this year's budget, and finally we'll take a look at the updated five-year budget outlook.

So we'll start with good news up front because of both property tax and sales tax projections.

We do not anticipate recommending a tax increase this year.

And we'll share some additional details on that later in the presentation.

We'll start by providing a quick overview of how we shape the base budget.

It's a focused, transparent approach to developing our recommendations.

We start with revenues for fiscal year 27 based on projections for each major revenue source.

This information comes from the county, economic data, and department fee estimates.

We collect departmental based budget submissions, and we prioritize investing in competitive pay and benefit adjustments, both of which are directly responsive to council's organizational and fiscal sustainability goal.

We account for rising operating costs such as utilities, fueled technology, and fleets.

And finally, we align available resources with council's priority investments and departmental budget ad requests.

As we begin to develop the budget this year, we've grounded our work in four key commitments.

Employees, core services, council goals, and long-term sustainability.

Our first commitment is to invest in and support our employees who power the organization through competitive compensation, sustainable benefits, and a workplace environment that supports retention and growth.

One of our biggest cost drivers and our biggest assets is our workforce.

In the fiscal year 27 budget, we'll be recommending a competitive pay adjustment to support both retention and recruitment funding for what we expect will be a significant health insurance increase this year, and another required increase to the employer retirement contribution rate.

The town is committed to sustain our core services.

Those include public safety, solid waste, parks, and other essential day-to-day services that our residents depend on.

We continue to navigate significant inflationary pressures that are driving up the cost of providing even our most basic services.

Everything from small service contracts to purchasing essential equipment and day-to-day supplies.

We're strengthening our technology environment through an enterprise-wide approach that leverages economies of scale, modernizes outdated systems, and directs resources where they create the greatest organizational impact.

And we're making meaningful progress towards long-term sustainable funding for core service areas, slowly closing structural gaps, aligning investments with council priorities, and preparing our organization to meet future operational and capital needs.

We're committed to make intentional investments in your biggest priority areas.

Those include terms of community, housing, environmental sustainability, and organizational and fiscal sustainability, and other areas critical to long-term community well-being.

We're moving from planning to action, bringing complete community to life through adopted plans and fully funded projects that are reshaping how people live, work, move, and connect across our town.

We continue to pursue bold and innovative funding strategies to advance your housing goals, from leveraging local bond resources to federal and state grants to local housing funding sources, so that we can expand access and deliver on longstanding commitments to affordability.

Even as federal funding remains unpredictable, we're pushing forward on your environmental priorities, maximizing available grants, accelerating climate focused investments, and strengthening long-term resilience across our organization and community.

Our work is anchored in a five-year financial outlook that guides key decisions, closing long-standing structural gaps, and steadily moving us towards true fiscal sustainability across our core service and capital needs.

We'll next look at key revenue trends and updated forecasts for fiscal year 27.

Last year, the county the county estimated that about 5% of our assessed valuation post-the revaluation would be lost due to appeals.

That estimate turned out to be much too high.

So actual valuations and in turn our property tax collections are coming in much stronger than we expected, and as a result, the general fund is seeing about 2.85 million dollars more revenue this year than the county projected we would.

The higher valuations are also benefiting our debt and transit funds and will help keep us on track with our five-year budget outlook.

With this strengthened tax base, we will not be recommending a tax increase for fiscal year 27 unless something significant comes up or changes between now and the presentation of the manager's recommended budget.

The value of a penny tells us how much one cent on the tax rate will generate in property tax revenue.

Property tax revenue is calculated by taking the total assessed valuation of all real and personal property in Chapel Hill and multiplying that by the current tax rate, which is 50 cents.