Okay, council, we'll get started with our budget work session.

Meeting is called to order.

Turn it over to Jay Choppa.

Well, good morning.

This is the next in the series of our budget work sessions.

And as a reminder, this is all kind of work in progress.

So providing the council information as we go through it as well as updates as we get them, especially from our appraisal districts, and so you'll see some of that.

There's not anything specifically.

We'd love your feedback, but nothing specifically for you all to make decisions on today.

So this is uh the next step as we go through this process.

With that, Christiane or come up and be our first uh presenter related to the budget responses from the last meeting.

All right, good morning, everyone.

So I do not I don't have anything specific to present, but I just wanted to remind everyone what a budget response is.

So it's kind of like the informal report for the budget work session.

So as you have budget specific questions, then the lab will coordinate with the different departments to do a written response.

So I think I got a paper copy to most of you just in case it wasn't in the folder.

I heard that maybe it wasn't.

Um but today's only budget response was sort of a proactive one since you're hearing about street maintenance.

We've heard some questions over time about you know how effective is TPW's current delivery of the street maintenance pay-go program, and if they did have additional funding, you know, could they spend it?

And so that's what this VR aims to address.

And I know Lauren's here if you have questions.

Council, any questions related to that particular budget response.

Thank you, Christian.

Then I think we're gonna we're gonna start with street maintenance.

All right, good morning, Mayor and Council.

I'm Lauren Preer, your director for transportation and public works.

Today I want to begin by talking about longevity, what it will take for our city to remain strong over time.

Longevity, whether in a business or municipal sense, often comes from steady leadership and a consistent investment in the systems that make everything else run.

Markets shift, technologies evolve, and people will change roles.

However, the organizations that endure all pay attention to maintenance, they fix small issues before they become structural failures, and they invest not just for growth, but also for stability and resilience.

Human health also works in the same way.

Today, longevity is often framed as biohacking shortcuts and gadgets.

However, the truth is much simpler.

Longevity is maintenance.

By the time problems develop when preventative care is deferred, and the time symptoms are obvious, the cost to regain our health is always much higher.

Our street network also works in the same way.

Pavement doesn't fail overnight, deteriorates slowly and predictably.

By the time the problems are obvious, the cost of repair is always higher.

Many families and businesses are facing.

Budgets are tight, and the discussion of an added fee can feel like a strain.

That concern is real.

However, the challenge we face is also real.

A $66 million annual gap between what our streets need and what we can currently fund.

Council is already taking meaningful steps.

However, even with these investments, the gap remains too large to close without a dedicated and stable tool.

The proposed street maintenance fee is designed to be small, predictable, and based on how the system is used.

It'll preserve the 40 million dollars currently in the budget and add a funding source that is not competing with other essential services.

And the impacts will be immediate.

Pavement resurfacing will triple.

Crack ceiling will expand nearly fivefold, and heavy maintenance will go from 86 lane miles to over 125.

This is the equivalent of preventing more than one full bond programs worth of deterioration annually.

So this is truly the difference between paying a little now or a lot more later.

So longevity is not about doing more with less, it's about doing the right things at the right time.

So your system remains adaptable, capable, and efficient as the conditions change.

This fee is also not about growth for growth's sake.

This is about protecting the investments we've already made, ensuring our streets remain safe and reliable, giving our current and future residents a network that is stronger because of the decisions you make today.

So this is maintenance, this is stewardship, and this is how our city will remain strong.

I'd like to turn it over to my assistant director, Lane Zarate.

She's gonna walk us through the details of our proposal up for your consideration.

Thank you.

Alright, I'm gonna roll right into this.

Our purpose today is to show you the fee that we have developed for your consideration.

It's designed to provide a stable and dedicated revenue source, improve our street conditions citywide, provide prevent costlier reconstruction, and at a smaller monthly rate.

So my purpose today is to show you that fee and how the benefits will be that it increases our street maintenance by 50%, that it will give us a five-year proactive cycle on our streets, touching every good street once every five years, increase our pavement life by 12% per year, think about that after five years, and avoid 125 million dollars per year in future reconstruction costs, all for this flat $3 residential rate.

So in order to show you that, I'm going to step through our presentation today in kind of this storyline format from the challenge to the results, and we will have time at the end to do a recap and to get some direction from y'all.

Our street maintenance funding challenges have been longstanding, and has culminated after years of underfunding to be our citizens' highest importance and lowest satisfaction city service.

I want that to sink in for a minute because that is a call to action.

And so we have been trying to find a solution for a while to address this, this call to action.

So in order to find that solution, though, we really need to understand the nature of the problem better.

And so, in order to do that, I'm going to give y'all a pavement management 101 tutorial, but I'm going to use our own city data to explain it, right?

The city does a condition assessment every three to five years, and we collect a robust amount of data, and we can roll all that data up into an overall condition score for each street, which is called the pavement condition index, also known as PCI.

So for our purposes today, I am going to use three simplistic categories for our conditions.

Good looks like this picture here.

It is a PCI of 85 and above.

Early maintenance though can save money and avoid costlier work.

So to show you this, I am doing a lifecycle cost example.

So when a street gets constructed, it starts out at year zero at a 100 PCI.

And it will follow a typical pavement deterioration curve, like you see here, until it is a PCI zero at in this example a year 40.

Now, if we can fund maintenance interim throughout its life, we can do a crack seal, and that would increase the condition and push out the deterioration curve, increasing its life.

And then again, for a surface seal or a mill and overlay to replace the surface, each of these maintenance procedures, every time we touch it, it increases its condition and pushes out its life.

If we don't have the maintenance funding, then what is happening is we let the street deteriorate along its typical deterioration curve until it gets bad enough that at some point it competes for bond funding and is lucky enough to get to selected for reconstruction at a cost of 2.5 million dollars.

So both of these examples for this life cycle of the street end up at the same PCI at year 40.

The takeaway here is that by spending money on the maintenance, we are saving a lot of money in the life of the roadway.

We can extend its life, keep it in better condition, and save about 2.1 million dollars per mile.

If we do the return on investment calculation for this, every one million dollars that we invest in maintenance, we can avoid spending almost $5 million in future reconstruction cost.

So maintenance has a very high return on investment.

This is one street, but now I'm going to show you these three categories for our whole network that we are maintaining.

We have 3600 lane miles of green streets.

These are streets that still need work.

They need preservation, right?

In order to stay good, all streets require maintenance, just like your car.

So that is a good amount of work just to maintain the value that we have in our new streets.

We have yellow streets, 2800 lane miles.

This is where we generally spend our pago dollars, our maintenance money, doing heavier maintenance.

Then we also have 2100 lane miles of red streets that are below a 50 PCI and would be at this point likely waiting for future bond funding.

These are not serviceable by maintenance procedures.

This is a large backlog that is indicated that we are not adequately funding our maintenance, and our network is deteriorating faster than we can maintain it.

So what is that deterioration look like?

If we take all of those streets that were in that map and we put them on a bar graph based on their percentage in each of these categories, this is what our network bar graph looks like.

And you can see the cost for these procedures increase as you go up.

So next I want to draw your attention to these hashed areas in between the categories.

And I'm sorry, can you give us an example of what preservation maintenance is, like a task that's preservation maintenance and one that's heavy maintenance, so sure.

For asphalt streets, preservation would include crack sealing and surface sealing, like a micro surface or slurry seal.

For a concrete street, preservation would be joint sealing, crack sealing.

They make gray crack seal now, so you'll have to put the black stuff on concrete.

For heavy maintenance, asphalt would be replacing the entire surface through a mill and overlay or a uh I guess recycle in place type of procedure that goes full depth.

Thank you.

Oh, and for concrete streets, heavy maintenance is panel replacement, right?

Because for concrete you have less maintenance procedures.

So if it breaks, you replace it.

So back to our graph.

The hashed areas in between these conditions represent streets that our model is predicting are going to go from a less expensive procedure to a more expensive procedure next year.

So these are our vital streets to fund with our maintenance dollars.

If we don't have the funding to maintain them, then it gets more expensive next year.

And this is called deferred maintenance, and there is a cost impact to deferring maintenance.

Let's look at that compounding effect every year that we're deferring more maintenance.

This is the same bar graph, percentage of our network by condition from 2022 to 2026.

Now we add streets to the green each year, so that kind of throws off the linearness of the degradation from preservation into heavy maintenance, but you can definitely see very clearly the trajectory of our red streets and our bond backlog.

This is indicative of having unstable funding for maintenance or insufficient funding for maintenance.

So we have done a simple calculation to find the average for each year that we are deferring into the bond, and that is 150 lane miles every year at 2.5 million dollars to reconstruct.

So how do we fix this?

Right?

This is the nature of the problem.

How do we fix this?

We have to increase our funding to a level that is sufficient as an average.

We've done our own independent analysis, city staff.

We found we had about 30% we thought at the time of what we needed to do the vital street segments that deteriorate each year, but we wanted to confirm that we hired our consultant to do a five-year analysis, and we have presented several times slides about that analysis.

Today I'm just going to share with you kind of the high-level summary slide of that.

You can look at the year-over-year variation, but that's why it's important for you to budget at an average.

Going back to your prior slide year-over-year deterioration.

Just curious.

So it's from one condition assessment to another condition assessment.

Alright, so we have a $66 million funding gap, and that is a very large funding gap.

It's not easy to solve through traditional means.

We've been looking for a solution for a while, and it's not the first time that we brought the fee before you.

Um and the criticality of it, we brought forward a fee recommendation for the full funding need.

That was larger and not very palatable.

The city decided to explore alternatives like closing that gap through property tax.

I think y'all just recently received a presentation on the current state of the budget.

I think 2024 was when the external circumstances started to shift for us in property tax, which was an unfortunate timing, and here we are because in 2025, we decided to look again at a fee, but this time at a supplemental fee to our existing funding that we could put forward for consideration.

That solution that we are bringing you today as a supplemental feed to our existing funding, I'm gonna hand you over and to Trey Shanks to go through.

Trey Shanks is the group manager for the Frieza Nichols Infrastructure Management Group.

Well, before Lane leaves, I want to just thank you for the extraordinary work that went into this presentation.

And so I have watched you as you have worked through this and your commitment to coming up with the best solution for residents and the city to minimize our shortfall has just been absolutely wonderful, and I want to thank you in advance for that.

I will be back up.

Okay.

Again, I'm Trey Shanks with Freeze and Nichols, and uh we were uh helping with the technical analysis.

So what I'm gonna do is just walk through a little bit of the approach to identify um uh what the fee would be for each property, the technical aspect for that.

So start with just kind of introduction of the concept of it.

That you know, we're all familiar with the water system.

Um, the city for over nearly 20 years has had a stormwater utility fee as well.

Both of those have a mechanism to determine what is the usage of that system and how do you pay for it.

You know, the water system you've got to meter, it's very direct and clear.

With stormwater, it's a little bit more indirect.

It's that impervious area.

Um, it's a proxy for the usage of the system.

When we talk about with roadway is similar from the standpoint of having a proxy.

We're gonna think of vehicle miles traveled, the amount of traffic generated.

So the number of trips and the length of those trips, we'll get to what we call vehicle miles traveled.

So, and this is gonna be based off of an industry standard manual called the Trip Generation Manual that's put out by the Institute for Transportation Engineers.

So, first, before we jumped in to the approach, we have some guidelines we were working with as Lane and Lauren mentioned you know uh the guidance was to target a smaller supplemental fee.

So, this is not the fee that you're gonna see is not set to try to cover the entire gap.

So it's a smaller supplemental fee.

We're striving for an approach that is easy to communicate for the community that minimizes the staff administrative burden so that the revenues generated can be targeted to street maintenance and not administration of the funds, and based off of the use of the system.

So we'll look at you know this approach.

One of the key things to note on this, the the trip generation manual is based off of empirically collected data across the country.

So they actually look at different types of properties, how many trips are generated based off of those different types of properties, and that's the basis that we're using here.

Okay, so getting to that ease of communication.

Um, first what we did was we identified these street maintenance fee categories that are all common language type of categories, but that are really grouped to have a uh similar properties within each of these categories have a similar amount of trip generation.

Okay, so you see single family and multifamily at the top, and then you see you know as you work your way down, you see a variety of types of businesses and the like.

There we go.

Okay, but so for each of those again, based off the trip generation manual, they have their own identified vehicle miles traveled estimate.

Um, it says per development units.

That because that depends on the size of each property within that category.

So I'll walk through that a little bit.

And again, the basis for estimating the size of the property, you see there's various characteristics.

So for single family and multifamily, it's based off the number of dwelling units.

So for single family, that's always gonna be one.

For multi-family, it's like apartment units, the number of dwelling units in that complex.

For schools, the number of students that attend the school.

Um, same for hotels and motels with the rooms.

Everything else is based off of the what's called the gross floor area for the building.

So that's the floor space of the building.

So you think of a high rise or an office, the amount of floor space that there is.

There we go.

Okay, so going back to that as initial guidelines, targeting a smaller supplemental fee, we targeted a dollar amount of three dollars per month per residence.

I'm gonna back calculate what that functionally means.

So we assign that as three dollars, knowing that we're not covering the full cost of that funding gap.

Okay.

Simple math here of things, but knowing that we've got this development unit, vehicle miles traveled to 4.32 or $3.

What we get is the 69 cents in change of cost per vehicle mile traveled.

As you apply that to all these categories, you get these actual different rates per development unit.

Okay.

So that's what really ends up mattering.

Now, again, these are just the rates by the category, and so we still need to apply those development units to that.

So as we look at different types of categories, there are some that have their small properties and some that are large.

So if you think of offices, a small office will have a small number of development units.

Uh, a high rise will have a lot of development units, so their overall charge will be significantly different.

They're charged off the same rate of that 9.11 vehicle miles traveled per development unit.

Okay, I want to show some examples.

I have a question, I'm sorry if you interrupt you.

Um, so on the property examples that you have, where does the liquor store and the car wash fall?

Um, so I'll walk through um and see as we go in this.

Um, there's oh there's auto service categories that for the car wash, probably fall within that, and retail would probably be for liquor.

Okay, thank you.

Okay.

So here's some, you know, taking that calculation that that technical methodology and applying it to some example properties across town.

I have a couple of slides of this, so I apologize for all the content on there, but I wanted you to see you know what that monthly charge would be for various types of properties.

So you see for single-family residents, of course, again, three dollars per month, for an apartment complex for this exact one, it'd be you know a little less than 440 dollars.

A different apartment complex would have a different charge per month.

Um, example school, you see a hotel example, uh, the senior living center as a category, and then an example church of a little less than sixty-five dollars a month.

And then on the re on the uh business side of things overall, these are all based off of the floor area.

Here's examples, everything from a gas station down to a big box store.

You see an Amazon fulfillment center in there.

So you see a large range of monthly charges.

Um, I'll use the Amazon Fulfillment Center as an example.

It's got a relatively low rate of two dollars and sixty-four cents.

That's a very high number of development units.

So they have about a $2,700 a month monthly charge, and as a result, so that's the key aspect of where the rate is not the full, the category rate is not the full story, the full monthly charge is what tells you the full story.

Okay, so with um with all of that, um together applying that across the city, um, focus on the number at the bottom first.

What we're estimating is that a three dollar a month charge to a single family residence and the proportional charge to all other properties would generate about 27.4 million dollars a year towards street maintenance.

So that preventive maintenance, that heavy maintenance activity.

When you factor single family and multifamily together, you're at about 40% of the overall uh revenue is coming from the residential side, and about 60% is coming from all other types of properties.

Okay, we'll turn back over to Lane to finish things out.

Alright.

So with any new service fee, the implementation is going to be key to success, right?

So we're going to share with you some of our planning around the implementation for this.

First, let's talk about the timeline.

We are in this summer with you working to refine the fee that we are putting forward today.

And if it gets approved, would be adopted around that September time frame.

However, the fee would not begin until spring of 2028.

The reason for that is because the city has decided to be fiscally responsible and do one billing integration into the new water department software, which has a schedule for implementation to begin in spring of 2028.

That means that we will have an 18-month window to really do a lot of good, robust implementation work.

The other thing I want to point out about this timeline is that that means that this fee that you will be considering this year is not going to be in effect at the same time as any other fee increases that go before council this year.

So we have 18 months.

That's the good news.

We can really do a great job with public engagement, process development, and make sure that this goes smoothly.

All right, process development will take a lot of effort.

We have processes that we need to create for the billing integration itself into the new software with the water department.

We have processes that will support data management, creating this street maintenance fee layer and maintaining that, which will be supported by development processes.

We also need to put in place processes around any usage-based exemptions.

Right now, the usage-based exemptions that we have are for properties that are not developed, so they're not generating traffic, right?

They might pay taxes on that land, but it's not developed.

Then we also have a not a usage-based exemption for no vehicle properties, right?

So they can apply for that usage-based exemption if they can show that they really don't have any registered vehicles for that property, and we can validate that through the DMV, and we'll have to create a process for that.

We also want to create processes for reporting our revenue, tracking our expenses, and all those things that are necessary for public transparency.

Alright, in this 18-month window, we will also be doing a lot of work on public engagement.

So this graphic here is a representation of the online property fee map that we're putting together.

This will allow people to go in to their specific property, click on it, see what their category is, and use an online calculator to figure out what their monthly charge would be in 2028.

Our public engagement will also include public education through budget meetings, other public meetings, our website updates, etc.

We also want to continue getting public input.

We started that process already.

We did a focus group back in April with stakeholders, and I wanted to share with y'all some of the results from that.

All right, our focus group was about a two-hour education session.

It also included some discussion and then a final survey.

So this pie chart shows the results of the final survey after that two-hour education session.

61% were supportive of the fee that we proposed.

11% were conditionally supportive.

So that meant that their survey said they liked the fee as a mechanism, but maybe not all the details.

And then other people, there was 11% that were undecided, and 17 not supportive.

So generally supportive after being presented with all the facts.

The reasons that they gave in their surveys for being supportive is that they just recognized the criticality and the need for this funding.

And they also liked that it would be a dedicated and stable funding source.

So you know, we've seen just all the city needs, the challenges to fund it all.

So setting it aside as a priority and as a stable and dedicated source that can't be used for anything else other than street maintenance was a benefit.

And then actually the last one here was a surprise.

Some of our stakeholders said that they supported the fee mechanism because the city of Fort Worth has done a great job with showing, you know, great programs and results after other fee implementations.

Yeah, that was a pat on the back.

The focus group consisted of a pretty diverse group of stakeholders that you can see there.

And because of that, we got a lot of good perspectives.

You know, while all the stakeholders understood, you know, there would be rates and fees to pay, and they also provided us suggestions on additional benefits to some of those groups, like small businesses and then schools too, through career and technical education programs.

So we're going to pursue those suggestions.

And they also suggested communication strategies behind providing more methodology examples, real life examples, and then focusing on the fee benefits as a preferred mechanism and some of the success stories from the stormwater.

Alright, this is where we get to really show what we can do with this fee.

We have proposed how we would use the revenue, and our strategy is kind of indicative of this bar graph, right?

When we talked about this bar graph, we showed that we have vital streets going from preservation into heavy maintenance and from heavy maintenance into a bond backlog.

If we only fund the things that are going into a bond backlog, we will be able to fund less lane miles per year out of the heavy maintenance category than we would be actually adding into it from not doing preservation.

So this battle is something that we have to fight on multiple fronts, and so we are proposing to use the revenue, 25% in-house for preservation and maintenance, and then 75% to contract out heavier maintenance.

And just a reminder, you know, bond streets, if they're already red, would still have to wait and compete for bond funding because our maintenance dollars can't be used for those.

This is something a proactive cycle is something that you know stormwater already has on their storm drains and their culverts, but we would be able to start this in streets and touch every good street once every five years.

This would increase our payment life by 12% per year for our entire network.

So after five years, 50% increase.

And just by doing that, we would be avoiding about $16 million in future reconstruction for maintenance.

The 75% of the revenue that we want to use to contract out heavier maintenance would be used for both concrete and asphalt streets, and we would be able to achieve 50% increase to our annual maintenance.

That would save us or avoid $110 million per year in future reconstruction costs.

That is huge.

Think about you know the amount of reconstruction that we are investing in our bond in the reconstruction category.

It's $129 million.

So this is equivalent to about one bond program per year that we are preventing from adding to our bond backlog.

In four years between bonds, we would be adding four bond programs if we don't close the gap.

So to highlight the combined results here.

Um green streets and yellow streets are all throughout the city.

They're everywhere, and we would be able to have a measurable impact on all of them on the green streets with a five-year preservation cycle, and then for the yellow streets, a 50% increase to our heavy maintenance for those vital street segments each year that are gonna cost us more.

And then because we are doing this maintenance, even though we aren't spending our maintenance dollars on red streets, it has the impact of reducing our future capital costs because we are preventing that equivalent of one bond program in reconstruction per year.

Right.

So we are gonna sum up for you because it was a lot of information, but we've talked about how street maintenance is top priority for our residents, how our funding is just not sufficient to address the problem.

With a three dollar per month dedicated fee, we can provide citywide improvements and prevent far costlier reconstruction.

This mechanism uniquely provides stability in the funding, right?

Because it's not subject to external um, you know, property value fluctuations, economic turns, etc.

Pressures, and then it's also dedicated, it can't be used for anything else, it's restricted to only street maintenance.

And so with that funding source, we will be able to increase our maintenance, extend the street life, and reduce our future debt.

We have communicated this to stakeholders and found that they are generally supportive when all those facts are clear.

So we would love some input from you, either on these categories of fee refinement structure or public engagement, or just any other questions that you have.

Thank you, Lady.

Councilman Flores.

Yeah, a couple questions.

First, I'm looking back at a presentation, uh, a preliminary presentation that was given to council in 2024, and I'm looking at some of the numbers, some of the changes, uh, increases, for example, in the average annual supplemental funding needed across years.

Um, I just want to make sure that I'm looking at this right.

Um, 66.1 million per year.

That was averaged out then, and now we're at what 110?

Is that right?

Or the gap is still 66.1.

Um, what's the average over the course of the years?

Still pretty much unchanged.

We we kind of established that target as an average.

Um we could go back and analyze again, but I think as a target, it still remains good to get as close as we can to that number.

It's not a significant amount of years that has passed anyway, from then.

And then my second question is um under the preservation category.

What is fog seal?

Oh, fog seal.

Um fog seal is an asphalt like bituminous.

I know that's one of those engineering terms, but um it's a asphalt liquid that um you can spray on top to kind of help create a coating that um covers up the oxidized top layer of the pavement.

So again, I know like what is oxidation.

Um, but you know, the streets that are asphalt, they go from black to gray, right?

They get old and they dry out.

That's basically the oxidation so um it it gives that fresh surface coat that is less susceptible to sun and wear and tear and water.

Okay, and cheaper than crack sealerships.

Right.

Alright, thank you.

Okay, you have something before.

Oh, okay.

Um, and I probably I should have asked for this when we met a while ago but it didn't dawn on me until I saw the map of the red um yellow green streets I know that this funding is specifically for those green and yellow streets to prevent them from going red I think what I and I um I think it's tremendous the amount of money we'll be able to save and what we'll be able to do with even if we kept the bond dollars consistent year over year um those number red streets that we'd be able to tackle and so I think that might be a helpful number for us to to be able to talk about is by implementing this fee um let me back up and say the worst streets are what people complain about and so we're gonna implement this fee and we're gonna do a lot of um lighter work that maybe is gonna go unnoticed but it the big bang for a buck is the money we say that we're gonna be able to invest in a bond to redo those red streets and so if we have say for example there's 2600 miles of lane miles of of red road right now at the current rate that we're able to put um projects in the bond it would take us 10 bonds to get it done but with this fee does that then reduce you know if we were able to do all of them does that reduce that to you know three bond cycles or four bond cycles so that we have some way of saying it doesn't just help short term but long term it helps us increase um our ability to address these issues in the bond instead of deferring them I love the idea of that graph and I can create that graph for you.

Yes we can we can show you that um yeah we we aren't directly saving bond money now we are avoiding incurring that cost later right by not doing the maintenance now and so what we're doing is we're slowing the the building of the backlog on the bond right so we still need to fund bond at the same level if not more um but if we don't want to have our red streets wait even longer to get addressed through those bonds then we need to provide the maintenance to keep the good streets good.

But I will create that graph for you because now I'm it's gonna be a good one.

Council Member Larsdorf thank you mayor yeah to councilman beck's point that's that it's really gonna be key especially on the communication piece because up north we we do have quite a few green and yellow roads uh and I drive all over Fort Worth and I know some areas are really really rough um so I could see how somebody like wait a second why like our streets are terrible and these are you know because I mean let's be honest a lot of the residents stay they stick to the rivers and lakes you're used to right they stay in the the area they're in um and so they don't yeah yeah that just don't go chase them more anyways um they may not realize how bad it is in other areas so I think the communication is gonna be key because I think it's great like saving a lot of money in the long run.

Um but I did have a question um on the stakeholders I saw universities but I didn't see any school districts were any school districts involved in it at all uh we sent out invitations to all the school districts um the universities were the ones that attended yeah I I know of a district that doesn't seem to respond to postcards too so I'll reach out to the school district um because I I don't I mean anyone who is alive understands right now our school districts are really suffering financially too I mean school closures uh cutting staff um cutting programs and so I would like to see I know that they it accounts for three percent of that uh but if there's a way to exempt the the ISDs um because they're already point three is it point three okay I thought it was I thought it was three so okay that's that that's much more palatable but I'm sure uh Dr.

Hall could probably speak to that uh much more eloquently, but I know that's probably gonna be a much tougher pill for them to swallow for sure if if you can put me in contact, I would love to set up a meeting uh one-on-one and go through it with them.

Yeah, absolutely.

I can easily do that, thank you.

So counselor peoples I'm part of that 61% that is in agreement with the fee, and so in anticipation of this, I have mentioned it as I have been out to my constituents that uh when they complain about streets.

I say, if we had to put in a fee, and people understand that and are in agreement.

And I think you know my district runs from some of the red streets all the way up to some of the green streets, and I have broached that in all those settings, and I think what you've done is well thought out.

Uh I do like the idea of giving us the space to do a long-term implementation, uh, but I think that most people, when it's explained, are in agreement because they do streets are a number one priority.

One more miracle.

Michael then, Carlos.

Uh thanks, Lane, for uh putting it together and also the meetings we had or a meeting we had prior to that.

My question really is how are shopping centers handled?

Are the businesses inside there paying the fee or the shopping center itself?

So the owner of the property or the shopping center would receive that bill.

Now, if um, you know, in some cases it might be, you know, under a hundred dollars, in some cases it might be several hundred.

Um, if that owner can absorb that within their you know operating budget, um then it may not get passed on.

Um, but it's just a property by property decision as to whether or not they charge their tenants any more.

Okay, I was just I'm using Westcliff Shopping Center as an example.

You got a your there's an ace there, but you're comparing that to the same thing to a Home Depot, which may have a big corporate structure behind it versus a smaller franchise.

But I guess what we're hearing is that the individual shopping centers will decide whether they pass that along or not.

Right.

They're okay.

It's um it's based on size and you know, traffic generated and usage.

It's a you know a direct relationship between usage and and fee, um, and that's kind of preserving that integrity of and defendability of the fee, right?

Um, and we and I I bring that up because we've done a lot of work on small businesses, and when we look at this, we talked about that when we met too.

I think there's an area of refinement that might make sense to do.

We're comparing, you know, McDonald's, the same thing as Drew's place, right?

At least on the count of what they're doing, or a Starbucks to black coffee.

So we may need to look at small businesses a little differently, and I think that's worth a conversation as we look at the implementation piece of it.

Uh conversation is always good.

Um, you know, as far as um can we uh provide a non-usage-based uh discount or exemption, um, you know, based on something like you know, uh profitability of the company or or net worth, that is a um policy decision that I would also say, you know, y'all could request uh legal opinion on because it does um break that direct relationship between usage and fee.

Um I can speak to the considerations for that decision that would impact maintenance.

Um so if the discount or exemption were provided for anything that wasn't usage based, um the effect would be that um well, not only would we potentially set a precedent because I don't think we have any other city services that are usage-based that we do provide a non-usage exemption for, um, but we would also reduce the revenue, and depending upon um how we structure that in the future moving forward, it could get to where it is being subsidized by other ratepayers and to provide the same level of service.

Um, furthermore, any administrative cost for that discount or exemption, especially if it were not publicly available data, and I do not believe there is a publicly available data set for small business, um, the administration of collecting that information, maintaining that data set, would also come out of any remaining fee after that exemption.

So it's kind of a double whammy for that particular one.

Ultimately, you know, definitely get an opinion on that, and it's a it's a policy decision.

Thank you for that insight.

The other thing I'll say is if I can remember the conversation that we had back in 23, there really was a question of if we had contractors that could execute on all this work.

And the answer at the time was no, I don't know that we do.

I'm just wondering, has that been fully explored or will it be explored as part of this process, uh as we're charging this fee that we can't actually implement within a timely period.

Right.

Uh well when we initially kind of showed y'all what a you know a potential fee could look like, it was a very high-level um, you know, high in the sky option at that time, and um as we move towards solving it through property tax, we had a lot of discussions.

Um, and when we talked with our contracting community, um, they said that for them it would be comfortable at no more than 20 to 25 million additional contract uh maintenance per year.

And so at this with 75% going to contract, it would be 19 million, right?

Well, with under that.

So um so that is true.

Uh we originally showed you what the gap would look like as a fee, and through working through uh this process over the last couple of years, we kind of now understand what's most comfortable to our contracting community, and this falls within that measurable increase that we can deliver.

That's great, thank you.

Questions from council?

Yes, councilman for us.

How much does the uh give me an idea?

How much is the street maintenance fee um impact pay go?

That is what do we expect or project that we would save in paygo funding.

I mean, recently, you know, we uh instructed the city manager to give us more on the paygo side for street maintenance and other, you know, needs.

So in implementing this, what does that do on that sector?

And I know that touches on you know property tax and general funds.

So this fee is small, um, because we are expecting to keep our existing revenue through paygo.

If we don't increase, if we don't keep our revenue through paygo, and this replaces that funding, I mean, well, it couldn't replace that funding because it's not enough.

Um so it doesn't change our need to keep our existing paygo.

Okay.

Well, I want to start by saying thank you to saying and to TPW and Lauren and everybody putting this together.

So after last year, we went through a process of talking about this through the budget process, and what we did in the city manager's office is really asked them to put together a plan that, you know, based on what happened in the past, one residential fee was high, right?

So that's high that's hard to explain to our constituents.

Two, um, trying to get to that overall amount and the amount of dollars that come in, can we actually put that on the streets?

Is it feasible?

Uh and then and then three, you know, what makes sense?

How can we get to a point where we're adding a tool to the toolbox overall?

So uh they've done a masterful job in coming together.

Thank you to Frieza Nichols and group involved in in helping us with that.

The idea here is that we have about 33 million dollars in paygo, right, in maintenance.

We need 99 million.

Last time around they came and said, let's fill that whole gap with this maintenance fee, and it was it was too big of a bite.

So what's really coming back is at the end of the day, we need to get closer to that 99 million, so we stop dropping streets into that red bucket that we're never going to catch into, right?

So right now we're digging the hole with with the biggest backhoe that you have, right?

If this gets passed, we're now, you know, a group of 10 10 employees with with uh digging the hole with shovels.

Still, we're still digging the hole because we're not totally getting to that 99 million, but it's it's less that's being added to that backlog.

At some point we got to get to the point where no more backlog, so that food future bond programs can actually help us address the rent that keeps getting.

So um uh on the on the small business or those exemptions.

Uh there's a sip slippery slope there in that any group can come forward and challenge it in court, and if we're not being even with everyone, the whole program can disappear.

Totally understand the small business versus big corporate and all those kind of things.

Uh, but as soon as you start creating exemptions that are not uh based on the trip miles on something that is objective, then it becomes an opening and a crack for those legal challenges.

So that's why I would just uh warn us of going down that route.

Beyond that, uh again, you don't we're not asking for a decision now.

Oh, finally, I want to talk about the 18 months.

We made a decision, uh the water department had in their overall capital plan and program to replace the billing system that's long in the tooth and is old and needed to be updated.

We did not want to spend good money after bad money by going through the process of redoing the software to add this fee for one year, and then a year later having the new program and throw all that down, hundreds of thousands of dollars.

So we said let's wait for the 18 months, and it gives us the opportunity to to let the citizens know what's coming and provide education behind them.

That's how we got to where we are, and thank you all for all your work.

Thank you.

Okay, counsel.

I think our next presentation is Brady Kirk with a sales tax and property tax update.

Already getting booze, I haven't started well.

Right on the border at least of I'm still gonna be pleasant between good morning and good afternoon.

I know we're running a little long, so I'll try not to draw it out too much.

But we did promise a couple weeks ago we'd come back to you, give you an update on how the April values came in, and we're also gonna show you how we're doing, at least in this current year, for our sales tax collections.

So coming back to the number we showed you about a budget gap we're trying to close.

I think it would be fair to say probably the top priority of this budget season is thinking about how we can close that revenue expense gap.

Um the numbers within that assume that we were gonna have six hundred and fifty-one point six million of current property taxes and two hundred sixty-eight and a half million of sales tax revenue.

And so I'm giving you these figures so you can benchmark on those a little bit because as we look forward to what our projections would be for next year, anything we can do that's better than those would mean shrinking that gap, and um hopefully this doesn't happen, but anything below those amounts would mean widening that gap.

And there are other revenues, of course, but those really tell most of the story because those are above 80% of all revenues within the general fund.

And when we got our final values for setting the budget, our property values last July.

Uh given that this was the first year that we were not getting any reappraisals on residential property.

We were pretty happily surprised that we had almost six percent growth on those.

And the other counties were higher in growth than Terrent, but Terence really drove that by coming in at over five and a half percent because it just days before we got those, I was thinking it was probably gonna be about three percent.

And it was really the commercial growth that drove that, uh, given the reappraisal plan and and the fact that a lot of home values seem to actually decrease slightly year to year, and it was that growth that allowed us to cut the tax rate going into this year by a quarter cent.

This April kicks off the process and a few months of analyzing these and predicting what we might have by July.

Knowing that it's gonna come down because of protest, we're seeing about eight and a half percent growth in properties overall.

And that's better than we were doing this time last year in April.

So that's a plus, seeing that.

And once again, that's driven by our two larger counties and Terrent and Denton.

So both of those, again, thanks to commercial are higher in their growth than they were last April.

And uh commercial new construction overall, not just commercial and new construction, but that category is looking a little bit stronger than last April, too, because that was about 2.6 million this time last year, and that grew between April and July the past couple years.

So hopefully we'll see that same effect.

And I always want to give some detail on Wise County because I know that sometimes it's way up, sometimes it's way down.

So there's a lot of mineral properties that could make that really volatile, but now for the first time we've got a new subdivision of wise county, so that should stabilize that a little bit more over the years.

And these values that we got in April, they actually would have been probably a few billion dollars higher, but I want to tell you about what we're seeing for protests right now compared to previous years, and really remind you of the general trend throughout the summer.

So historically, or at least most of the years that we have on file, there's been next to no protests that we've had in April.

There's some in May, but they really spike in June, and then mostly they're all resolved by July.

So for whatever reason, and I think I would really just attribute it to the fact that Terrent Appraisal District has a new reporting system this year instead of the 20 million or so that we had last year, there's about 18 billion dollars already under protest for Tarrant.

So I think it's clear we're not gonna have a thousand times as much protest activity as we did last year.

As the chief appraiser, and he said he doesn't think his staff has really noticed a material difference in that volume.

So we're gonna monitor this.

I mean, it's always probably the hardest thing about projecting July value is knowing where the protests are gonna go.

And so it's not clear what this indicates, but again, I'll remind you that when we have properties under protest, we assume a lower value for them, or the appraisal district does.

So this 18 billion under protest means that these numbers are about three billion dollars than they would have been if it was similar to last April.

So if you're curious by type where we're seeing the growth, it's really a lot like last year, so it's looking pretty strong on the commercial side, and then the commercial personal property.

I'll talk about more on the next slide.

That probably would have been higher as well, maybe around that range of the multifamily and the commercial real property.

But if you remember, that's a property category that's got a major new exemption this year.

So I'll give you details on that, but you do probably want to take note of that single family residential, so including already some sort of an estimate for those values that are under protest.

Even though we have some new construction there, we're seeing that that's looking flat.

So I think that's gonna be very possibly similar trend to last year to where home values might actually see a net decrease, and that's again, those are not being reappraised in Terrent County, so some of those, if they have a successful protest, you can see how they would fall from one year to the next.

So, as for that new exemption, this is on business personal property, which is anything other than land and buildings that's used in the production of income.

And this went from a $2,500 de minimis exemption, and what that means is that anything valued over that wasn't actually even getting the exemption.

The fact that they had this was because it generated less revenue to have this on the rolls than it even costs to appraise it.

So that went from $2,500 in most accounts getting no exemption up to $125,000.

And previously, we estimated to you that we thought that would lower our revenue by about $6 million dollars in the general fund, and at least what we're seeing from April values is that's about $5 million.

So that impact was a little bit less than we thought it was gonna be.

That's another good point.

Point of good news, not a good point that I've personally made.

Yeah, it could be both.

And then using the term erosion, that's what we say, that's how we refer to the value that we lose to protest between April and July.

And as I said, this is so hard to predict.

So two years ago, it really caught me off guard at that six percent.

It was about a billion dollars worse than what I thought was the worst case scenario.

And then last year we had about a three billion dollar happy surprise.

So it's really hard to attribute meaning to that.

You could say maybe in 2024 after a few years of values really growing, maybe that's why it was so high.

Maybe you could say last year's was because they didn't reappraise on the residential side, but it's just hard to know for sure what that's gonna be this year.

But so that we can give you some sort of feeling about a realistic range.

We're gonna show revenue scenarios in a slide or two.

And so on the low side, we're gonna assume that 2024 value of losing six percent between April and July, and then on a more optimistic note, which is what Tad included when they gave us some July forecasts, we're going to assume that it's gonna be the same as last year.

So Tad ran a simulation where uh similar property types lost the same percentages they would have last July.

So looking at these revenue scenarios, and knowing that there's still a lot of time for this to play out, what these values are telling us maybe a realistic range would be is basically about plus or minus 10 million from what we've previously presented, and that's that uh bold and the tile size line, second from the bottom on that table.

So if we don't lose very much to the protest, we could be doing a lot better than the previous forecast, which is I mean, if it's 10 million dollars and negative 49 million, it's still almost a 40 40 million dollar hole.

But um, and this is not a binary outcome.

So it's possible you could see it being better than the good case, and what's most likely is it's probably gonna be somewhere in between.

And then to give you a brief explanation or reminder again on on how this part of the whole equation called unused increment works, is that one of the tax rates we have to report is called the voter approval rate, and that sets a ceiling on the maximum amount that we could adopt without going to an election, and what that gives us to simplify a little bit is that we could take all of the new revenue on new improvements and new construction, and on increases to existing values, we could take three and a half percent of that.

But if you go below that in some years, then you can basically save up some of what you left on the table because you didn't adopt the maximum rate.

So we should have after two out of the last three years, not being anywhere close to that voter approval rate, quite a bit of latitude.

And so just if you imagine our existing value growth somehow came in so high that it pushed that voter approval rate down to 61 cents, then we could probably use all of this unused increment, and we could have a flat tax rate.

So that'd be a great situation to be in if our existing growth was actually that high, but I think the bigger takeaway is we shouldn't really have to worry about whether or not we'll be limited on capturing existing growth.

We're gonna move into sales tax now unless there's any questions on property tax.

Sales tax is about a quarter of our overall general fund funding, maybe a little bit less.

And for a few years there, you can see we were really doing well.

We were averaging double-digit growth there, basically coming out of the pandemic, and I explained some of that about a month ago.

But we've been since then closer to our long-term average, which tends to be about 4%.

That's what we got last year.

And so, in order for us to hit the budget of $263 million that we set this year, we would need to get about 6% more in sales tax than we did in FY25.

So far this year, I'm happy to say that we've been quite close to that.

So we've had a couple months that are really not as good as we would like them to be, but on the whole, we've had a lot of really good ones.

And part of this discussion that can kind of get lost under the surface is that in some months, we're really in every month, we'll have some audit adjustment.

That's just a non-recurring thing that the state will take to take away from us or give to us if everything wasn't calculated perfectly in the past.

So this year we've got a big negative odd adjustment we've already absorbed.

So the fact that despite that, we're still close to getting that six percent growth, I think is a a really good sign.

I will say that just given the economic developments worldwide, nationwide, we probably haven't seen everything really even played out in the economy overall, let alone reflected in this data because it's two months delayed.

So our latest payment, for example, we we got this this month in May, but it was for March economic activities.

So some things might not, if there's there's price shocks, for example, in oil, that would have barely only begun to trickle into that data.

So we're gonna keep monitoring that, and I'll I'll touch on the topic of inflation and what that means for forecasting before I wrap up here.

But for our current year forecast, given what we've collected so far, um, of course, we're always looking at the economy, we're always looking at what growth means for us, but we can tell a lot from just seasonal trends, and so the the easiest thing to probably wrap your mind around is just how much higher than every other month December sales tax is because everybody's doing their holiday shopping.

So, based on what we tend to get in the second half of the year, and the 130.4 million dollars we've collected to date, we are projecting about 261.5 million dollars of total collections for FY26, and that's uh one and a half million below our budget, but that's about half of one percent, so pretty close and um better growth than we've seen the past couple years.

So if you move into next year, a few scenarios that we might consider if we weren't ever gonna get any more data, which we will, are that if we kept that growth going and we saw high growth in FY27, and we ended up at that 261.5, that we'd be looking at a sales tax budget of about 276 million, and even in a low-growth scenario, like we got in FY24, we'd be at 200 about 267, and that that's a little lower than that 268 I mentioned in the first slide, but here at least, in contrast to the property taxes, it's a lot more heavily weighted to the upside.

That's good news.

And when you oh, and so inflation, we're um July is when we'll get the last payment that we can use in really setting the budget.

And I was gonna say that that's that's always a better growth indicator because it's the closest one to the next fiscal year.

Um, but what's gonna be helpful as well about the July payment this year, which is for what's going on right now, May activity, that's not going to have any kind of bump that we might get from the World Cup.

And so we're all as much as we're all hoping that we'll see some increased activity, we wouldn't really want to bake that into our growth assumption for next year, so we won't have any concerns about that based on when we get that last payment for setting the budget.

And I'm sure you all see how much inflation is being discussed right now, and that's just one of those things to where it's got can competing impacts on if we think this is gonna go up or down, because I mean, you buy any given thing.

If the price is higher, that's going to be more sales tax.

So in some circumstances, inflation could lead to higher receipts, but if that's really a secondary impact of something that's not a good economic circumstance, and it's the opposite, of course.

So we're always working with our professional economists and uh collaborating with our data analytics team as well on those items to put it all together looking at the sales tax and the property tax revenue growth picture for next year.

Uh you're basically seeing kind of the same thing.

I mean, there's a wide range of outcomes.

We still might see based on the biggest piece, how those protests could shake out.

Um, the Fraser review board process, but also what's happening with the economy and our ability to sustain growth, especially in sales tax, and so uh July is when the picture really all comes together.

So looking at the timeline, July eighth is when we'll get that last payment.

July twenty-fourth is this year when we're gonna get those certified values, and then the first week of August is when we'll at least let you know what the no new revenue rate and the voter approval rate are.

And then throughout the summer, we'll present you with the proposed budget and adopt in September.

Questions from Brady?

Yes, Councilmember from Marsworth.

Just uh just a comment really.

Um, didn't really click until just now, but uh I don't know if you know Chandler Crouch at all, but he just filed forty seven thousand protests for uh for residents in Tarrant County, and he did it all for free.

So now I'm just wondering if you guys have a picture of him in your office, like just like cursing this guy.

Because he's out there doing God's work and he's probably like messing y'all's numbers all up.

So I and I just uh just threw them under the bus.

So forget I even said that name.

I won't curse him publicly.

I won't curse him at all.

I'm I'm sure it's a big help to the well, and and importantly, you know, we this is the system the state of Texas has set up.

And um, I'm always so impressed by your presentations to give us as as close as possible on revenue growth and um what we really think is gonna happen in July, moving into next fiscal year.

That's the point of these sessions.

And um, you know, we're in the service business, right?

Every dollar that we collect has to go towards direct services to the residents and make tough choices.

So I really do appreciate you being so thoughtful in this presentation and to the entire budget staff.

Thank you.

Thank you all.

Any other questions or comments?

Okay, council, any other future agenda items related to the budget that you'd like to make Jay aware of now?

Yes, Councilmore Hill.

Uh Jake, are we gonna get binders that have a more detailed budget breakdown before we get recessed for July?

Of this year's budget?

No, for the as we're as we're building out the 2027 proposed budget, I think that might be helpful.

I won't have we won't have a recommended budget by that.

I mean, it's constantly putting that together, so the whole the whole budget um until mid to late July when we actually have.

Will we get binders then?

You think you'll get them in August.

Sorry.

There's no way to provide a preliminary one if we're taking things out.

All right, thank you.

Anyone else?

Nope.

Council, thank you.

Meeting is adjourned.