Good afternoon and welcome to the Hampton City Council work session.

Madam Clerk, will you call a roll, please?

Councilman Bowman.

Present.

Council Vice Mayor Brown.

Here.

Councilwoman Campbell, present.

Councilwoman Fairby.

Present.

Councilwoman Harper.

Present.

Councilwoman Muggler.

Present.

Mayor Gray.

Present.

And we have several presentations on agenda this afternoon, so I'm going to turn it over to City Manager to introduce the first one.

Thank you, Mr.

Mayor.

And Council members and those watching, we're very pleased today to have with us Ray Amaruso, who's the Chief Planning and Development Officer for Hampton Roads Transit, our regional transit authority.

We wanted to review with you the system optimization plan, which sort of leads into the routes that we will be considering funding in our upcoming budget cycle.

And so this is really an opportunity.

Thank you.

And good afternoon, Mayor Gray, members of council and city manager Bunting.

I'm happy to be back here again to talk about the system optimization plan.

I know that your own staff has briefed you recently about the work that we're doing together.

I'm here today just to talk broadly what is the SOP, why are we doing it, and what the next steps are going to be.

Yours is the re remaining member city in terms of a briefing.

So the SOP, the system optimization plan, and what is the purpose of it.

In its most basic form, what I could say it's exploring how HRT can put its limited resources to its best use by seriously looking at underperforming low ridership fixed bus routes and reinvesting savings both in human resources, translation bus operators, and financial resources to routes that are waiting for operators.

We you you all know I've talked to you all in the past about our chronic issue about uh not enough bus operators to have the number of routes to serve the number of routes that we have today.

So uh reinvesting operators to routes that are waiting for more service while looking strategically at underperforming routes and how we could perhaps serve that transit demand in a different fashion.

So the SOP definitely is an outcome, uh, the system optimization plan will increase ridership by putting service where it's most needed.

We are, as a point of fact, in the bottom quartile for an agency of our size in terms of passengers carry per revenue hour.

Uh definitely improve reliability.

Um just in the month of June at the end of the fiscal year last year, we were missing upwards of 1,200 trips in the month due to the lack of operators.

Um result in the after implementation and overall more cost-effective bus network.

You all heard about our uh regional transit system, regional backbone network of 13 routes serving um areas of employment and with high frequency.

Those routes uh perform, you can see the low-income route, the low performing routes, uh the local bus routes cost six thousand and forty-three cents more per passenger trip than our high performing routes, and that's significant.

So the context for the system uh optimization plan, bus operator shortage, and HRT is not alone in this.

Every transit agency in the country coming out of the pandemic is struggling with having a large enough workforce in terms of bus operators to operate the system that we have today.

We do have 68 total bus routes.

Uh some of them are the RTS routes, some of them are the MAX commuter routes, others are the peninsula commuter routes geared to the Newport News uh shipyard.

But chronically, right now we're suffering from a lack of about 50 operators on any given work day, uh, such that we can't reliably put out every trip.

We put out about 2,000 trips on any given weekday, and and we're short about 50 operators.

As you know, the RTS network will be delivering high frequency service at 15 minutes.

That requires on top of the 50 that we don't have another 45 operators to bring the remaining 10 routes into the high frequency service.

So basically, the context is we need to match our resources, resources being the operators, with the number of routes that we operate.

We need to also keep a compact with our customers, our people who use transit, they're depending on us to be there when we say we're there, and they really don't want to hear about oh, we don't have enough operators.

But uh we can lose our customers quickly if we disappoint them too many times.

68 routes has been in place for many, many years now, since the merger, actually, and it's time to take a hard look.

Not all routes have the same performance characteristics.

You'll hear a little bit today from me about microtransit or demand responsive service.

It's a new option for serving lower market demands rather than serving it with the most expensive type of transit, which is a fixed route running on a fixed schedule.

We have two pilot programs, one in the city of Newport News and one in the city of Virginia Beach have demonstrated we can effectively serve that transit demand uh with demand responsive service that you would make a reservation via the phone.

So it it will become a key linchpin of mitigative strategies if we recommend some routes for elimination.

To fully implement the remaining 10 routes in the high frequency network, we need to free up more bus operators, that's the bottom line.

And eliminating underperforming local bus routes can do that.

Uh RTS routes, as I've said before, are have a higher ridership productivity than HRT local routes, and that's important because the way we fund services, you all recall, is that we get formula funds from the federal government, but the state is by far the largest uh contributor to funding uh providing operating funds, and they measure us based on a couple of key benchmarks, which I'm gonna talk about.

So eliminating service on low performing routes will help us with obtaining additional state funding.

We're also looking at streamlining consolidating routes that are either near each other or duplicate some uh portions of their route with the other, and then realign some others to eliminate route deviations and keep them tighter in terms of route performance and on-time delivery.

And we'll also make sure we're adjusting our levels of service based on the most recent land use, uh land use plans that have been approved by all six city councils, and employment density and demand so that this going where they need to go and bringing people to work.

So there's three bar charts here that uh have something in common.

They're the criteria the state uses to determine how much money they're going to award a transit property in the commonwealth.

And the first one is operating cost per passenger.

And I have two fiscal years displayed here, fiscal year 23 and 24.

I know you don't all are may not be as familiar as I am with the route numbers, so I've highlighted an orange outline those routes that your city participates either shared with Newport News or funds entirely on your own.

So there are two dotted lines and and several different colors here.

I'll walk you through that.

I will start with the the bet of the performance in terms of how many dollars you spend per passenger on the left, you want to be at that end.

So all those green ones are our RTS routes, and you can see they're our strongest performers, and they meet the uh benchmark of $11.86 or under it, so they do very well.

On the other end, far to the right, you can see routes that don't do as well.

We have some routes on the Route 111, you participate in funding that route with the City of Newport News, that uh you're paying over $30 to carry a passenger, which is a lot.

So when we talk about underperforming routes, we we have that in mind.

The second criteria, now this time it's good to be on the right-hand side of uh the left-hand side of the slide is passengers per hour of service.

Mostly routes run 60 minute service.

So if you're running a route 12 hours a day or 14 hours a day, you have one bus an hour going northbound, one bus an hour going southbound, and um if you're falling below uh the local bus average of uh 6.84 passengers per hour, you're not doing very well.

And again, you can see there's a couple of routes far to the right or that are underperforming or just at the benchmark.

We're looking for more passengers per hour because that's a measure of success.

And we have some routes both on the north and south side that carry more than 12 to some of them almost 14 passengers per hour of service.

The final criteria that the state uses to determine awarding funding for operating assistance is how many passengers per mile of service do you carry?

And again, this graphic shows both the regional backbone routes in green, and you can see that the highest performing routes, and then far to the right the passengers per mile, you can see that again, there's that Route 11 at uh performing less than the local bus average of a half a passenger per mile of service.

So the SOP right now, as we contemplate it, and we are working, and there's a footnote at the bottom of this slide.

We are working with your staff to refine some of the recommendations on the peninsula.

You all have retained the services of professional consultant to help city staff work with us to refine some of them.

Um so but right now we contemplate system-wide in all six cities, a total of 12 underperforming local routes that would be eliminated.

Uh that reduction would uh affect uh about 90,000 or free up 90,000 local service hours, 14 peak vehicles or buses, and free up 65 operators that we can then redeploy to the higher performing routes, bringing higher frequency.

Uh the system optimization plan in the regional transit system implementation requires that we have at least 242 peak vehicles or buses and 461 operators, and that gets us there, which also includes what we call an extra board in case somebody calls out sick, we have someone that can jump in the seat to replace that person because we don't have that today.

From a customer impact perspective, increasing regional backbone service will mean over 300,000 more Hampton Roads residents in the six cities will be within walking distance of a route that operates every 15 minutes.

So instead of one bus an hour, you'll have four buses an hour.

Uh the number of bus stops losing service under the system optimization plan account for less than three percent of our total boardings and alightings in the entire system.

Lower wait times is a good thing from customers when you stop looking at your watch.

If anybody still wears a watch, but when you stop looking at the watch and just know in 15 minutes another bus come by, is a really exciting thing for our customers because waiting for an hour, and heaven forbid you overslept and miss that bus, you're gonna have to wait another hour and be late at work.

So 15 minutes is a game changer.

And then finally, improving reliability by matching our number of bus routes, our service with operator availability, we'll be able to reduce or eliminate missed trips down to an acceptable level and not disappoint our customers.

And then from an operational impact, you know, believe it or not, bus operators are human beings too.

I know sometimes people are angry and and they take it out on the bus operator because that's the first space they see.

But we've had issues with operator retention.

They're either burning out because of the way they're treated or talked to, or because we're requiring mandatory overtime because of the shortage of bus operators and and and the effect is in the long term, they they pretty much say after 12 or 18 months, I can't do this anymore.

I can't work on my day off.

So while we're bringing them in as as quickly as we can, we have been losing them on the back end.

So uh by reducing the number of bus routes, um, we have the ability to keep our operators and keep them happier.

It also manages operating costs by freeing up local financial resources from these eliminated routes, the routes that you're good putting money about a 35 percent level to match the state federal dollars.

We can take those financial resources and reinvest them into the new microtransit service to address coverage of service.

We won't leave any any route today that exists, we will not leave that uncovered.

It'll just be a different way.

Instead of one bus an hour, you'll have a demand responsive service where you make uh your reservation through your cell phone on an app, and you'll be directed within 15 minutes to a virtual bus stop where you'll be picked up by a minivan.

You might share a ride with one or two other people, but you'll be brought to your destination either within the zone or to a connecting fixed route service outside of the microtransit zone.

And right now on the peninsula, we're envisioning five, maybe six um uh microtransit zones to cover the territory lost by the proposed route eliminations.

Ray, I got a question for you.

Uh Vice Mayor Boris.

Yeah, thank you, right.

Um before you get too far in your presentation on consolidation of routes, uh how do you plan to to make up for uh folks having to get to their destinations on time because somebody may be hindered by trying to get to the bus stop they are accustomed to announced no longer there.

And the second question is what mandatory overtime.

Um how do you with the cost of mandatory overtime?

I don't know if you pay time and a half, I don't know what what you guys pay for overtime, but seeing that that that is a cost that can be reduced, you know, if you start consolidating, so you'll save some money there.

So that's a cost savings, correct?

That is correct.

And then so the the concern is on time arrival to jobs and daycare and things like that.

So tell me a little bit about that if you can.

So the struggles we have, and that's a great great question, Councilman.

So the struggles we have today is we don't have enough bus operators.

Uh some of the 30-minute and hourly service, um, if we don't have an operator to put in the seat until we find one, it it means you won't be on time, and that customer waiting there is going to be waiting maybe another hour before the next bus comes.

Uh so um part of eliminating bus routes is you're freeing up operators that you can then put in the routes that do perform well.

Um mandatory overtime costs.

So operators have two choices when they bid in their work.

They do what we call a 5-2 or a 4-3, four days on, three days off, and the four days are longer days, or five days on, two days off.

But what's happening with mandatory overtime, they're having to work on one of their days off, which is a challenge because we all need some time off as well.

Um so we have an experiment or a pilot right now of not requiring mandatory overtime, but asking the union workforce, would you like to volunteer to drive an extra route?

So we it looks like our retention levels are getting better now, but we still are chronically short about 50 operators.

Now, on the first question about reliability, if you have more operators in the pool with fewer routes to serve, you'll be missing fewer trips and you'll be on time because we're not struggling to find an operator that wants to volunteer.

If you're using microtransit, you're you're reserving a vehicle that will either take you to your destination within that zone or will bring you to a bus route that's taking you to a connecting area outside of the zone.

So you it'll be timed because it's all technology-based via your phone, so that your connection will be there on the fixed route service or be connecting for microtransit.

So are you using cost savings once you uh eliminate some of the routes, the cost savings from overtime to make the service better or using cost savings to projecting 2013, 2030, 2030, 132 member when there may be some shortfalls in your revenues?

So the the question of savings, financial savings, is you all contribute on some of these underperforming routes a certain percentage.

On average, about 35% of the cost of running that service.

So let's take the Route 11.

I I don't recall per year how many dollars it is, so I'm gonna use them as an example.

If you're spending 20,000 a year matching the federal and state and Fairbox revenues to carry three people per hour, that's not a very effective way to use that 20,000.

So that money that you're using can be matched with federal and state operating funds to ride uh to support microtransit, which is operates at half the cost.

We use a turnkey operator, a contractor, and they're not commercial driver's license people.

You you can just have a regular license because you're just driving a minivan.

So this the money that you're putting in for these underperforming routes, you can carry that same number of people at half the cost.

So that's where the savings comes from.

And we get the benefit of freeing up commercial driver's license bus operators that we can put into the routes that are waiting for higher frequency service.

So that's the concept between microtransit.

It's a mitigated strategy that still provides those three or four people per hour a mobility option that's quasi transit.

Uh yes.

Are you looking at um you know it's very difficult to get a job driving a bus at HRT for this for the background checks and the things that people go on a military military base and stuff like that?

I understand, uh, but are you looking at ways because of the shortage of drivers?

Are you looking at ways to make it um uh less restrictive to become a um a bus operator?

And not that you're winking on things that are egregious, you know, crimes and things like that, but there are people out there who you know could potentially be a operator, but you know, had a mistake or you know, something happened and uh, you know, can't be employed.

So are the are you guys looking at that as a sh uh uh also?

We the short answers we are, but because we're a recipient of federal funds, there's certain USDOT regulations that we have to comply with.

Uh and there's also some health regulations about obesity and sleep apnea that they have to pass, but you can't use recreational drugs and drive a bus.

The USDOT makes that very clear.

So you are drug tested regularly.

So that's one of the big impediments.

Um you have to meet certain minimum health requirements.

You don't want a bus driver who who uh falls asleep behind the wheel.

Um so but yes, we are we're we're talking to 18-year-olds, kind of scary, but they have a direct, they can get a CDL.

You gotta put them in the seat of almost a million-dollar piece of equipment, but why not?

Um if they meet all the mandatory requirements, we can do that.

So we're reaching out to a lot of different cities and resource agencies to identify uh either ex-military people who had CDLs, we help people obtain CDLs.

We we send them in the class, we train them, we then we help them get their commercial driver's license.

So we're turning over Iraq to do that.

So just to finish up, um, freeing up uh the operators also allows us to speed up implementation of the regional transit system, high frequency routes.

There are 10 more routes to go, two in the peninsula are already in place, the Route 112 and Jefferson and the Route 114 on Mercury Boulevard, and then the Route 20 on the South Side and Virginia Beach Boulevard.

We've got more to go.

The only thing holding us back is the need for operators.

So schedule and next steps.

We're wrapping up the work with your your city staff and their consultant, in which they'll be says city manager at some point will be sending Mr.

Harrell a letter saying here's what we'd like you to modify the SOP plan to reflect this work, and we're in agreement with them.

So as we refine the SOP plan, we're anticipating an early 2026 public open houses to share the draft recommendations, then coming back in quarter two to all six city councils to brief you on what we've heard and talk about the final SOP recommendations.

Then we need to go to our commission, the Transportation District Commission of Hampton Roads to obtain formal adoption of the system optimization plan.

And then we can't do it all at once.

It's a lot of changes, so we're gonna do them in a phase implementation.

The first phase is anticipated of being implemented beginning May of 2027, and then we'll do it over three service boards.

Um take about a year and a half to fully implement the recommendations, assuming the commission and the councils are all willing to move forward.

So that's the rough schedule right now.

And I believe that's my last slide, so I'm happy to answer any questions from council members.

Questions, comments from council members.

Okay.

Thank you for that presentation, Ray.

I know when I was representing Hampton on the commission, I was on a smart city and innovation committee, and what some of the discussions we were having there was about autonomous buses.

So it seems like we we need them now sooner rather than later.

But I know there's still a lot to be worked out in the technology piece and policy issues and all of that.

So that's right, Mayor Gray.

The technology works best when the vehicles are moving slow because human beings are funny, they're not predictable.

That's true.

You dart out between two parked cars, sometimes an autonomous sensing device doesn't work well if the vehicle is moving too fast.

I I was on the National Autonomous Bus Exploration Committee.

I served representing HRT, and I've learned from the companies that do autonomous technology vehicle technology.

We do best when we operate 30 miles an hour or slower.

When those speeds begin to increase, if you're on a bus HOV lane or highway lane, human beings and cars do weird things, and and the sensing technology can't predict that.

So there's still stuff to work out, so it's a little bit more down the road.

And I wanted to take the chances to say thank you, members of the council.

This is um gonna be the last time you see me.

I'm retiring this month.

You're in good hands as that the person replacing me is a seasoned transit professional, but I am retiring after 44 years of service to the transit industry.

So it's been enjoying a pleasure.

Someone coming behind you has some big shoes to fill because I don't know that anybody knows knew the ins and outs of buses and bus routes and times any better than Ray Almaruso.

So thank you for your 44 years of service.

Great job.

City manager.

Yes.

The next item is a report on our annual comprehensive financial uh status for the year uh that ended June 30th, 2025.

Uh, this is a presentation we do to you each year.

Uh first we will hear from the external auditors uh with Cherry Beckert, LLC.

They are Shelby Brown and Lauren Harden, I believe, are presenting today.

And then following that, our finance, our chief financial officer Carl Dartry will do a more detailed review of where we ended up for the benefit of the public.

Okay, thank you, Murray.

Uh good afternoon, Mayor Gray, Vice Mayor Brown, City Council members, city manager, city attorney, and city clerk.

We are pleased to present to you today the fiscal year 25 annual comprehensive finance report is referred as the AFRA.

Um it is a major project for the finance department.

We spent many hours working on this project, and it's a testimony to a great staff.

Staff has done an excellent job in completing another AFR.

What makes it challenging is that the government accounting standard board, the rulemaking board for accounting standards for governments seems to keep producing new standards.

And it makes it really challenging in completing the report.

In addition, in 2025, we implemented a new software to produce our annual Commerce report, so it added some additional things that we have to learn.

But what our great staff rose to the occasion once again, and we have some finance staff with her us today.

Veronica Cummins, Andrea Lane, Ashley Bruner, and Janice Anison.

We want to get them around for a great job.

We also want to thank the many departments that contribute and play a role in the audit.

The internal audit department contribute hours to doing field work for the audit.

And that really helps to reduce the cost that we pay our auditors of the Treasurer's Office, the Commissioner Revenue Office, the Hampton City Schools, and many other departments.

So we want to thank them.

So right now engagement directors, Laura Hard and Manager Sarah Marg will come up and present the audit results.

Well, thank you for having us here this afternoon to present the results of the audit of the city of Hampton for the fiscal year ended June 30, 2025.

My name is Laura Harden.

I am the engagement director who oversaw the audit of the city.

I take ultimate responsibility for our issued audit opinion, and then Shelby Brown was the audit manager who oversee the oversaw the audit.

First up, we'll go over the results of the audit.

So we did audit the city as of and for the year ended June 30, 2025.

We issued our report on December 5th, 2025.

We issued what is called an unmodified opinion on the financial statements.

That is the best opinion you can receive as a result of your audit and is a clean audit opinion.

We also uh perform audits under both government auditing standards as well as the auditor public accounts specifications for audits of counties, cities, and towns.

We did not identify any noncompliance as under either those standards or specifications.

We also do gain an understanding of the internal control environment within the city that helps us to plan and perform our audit.

If we did identify any control deficiencies, we would report those to you.

However, we did not identify anything that we consider to be a material weakness in internal control over financial reporting.

Um something that's a little bit different this year is we typically issue our single audit opinion along with the annual comprehensive financial report opinion.

Um we were this whole process has been delayed for every single locality who is trying to issue a single audit because the Office of Management and Budget was significantly delayed this year in issuing their compliance supplement, which is required for us to have to be able to issue our opinion.

That opin that compliance supplement was finally issued the Wednesday before Thanksgiving.

So we're in the process of wrapping up those procedures, and we will be issuing a separate compliance reporting package upon the completion of that, which will have our report on compliance for each major federal program as well as internal controls over compliance in accordance with the uniform guidance.

Um during our audit, we did identify one misstatement that was corrected by management during what we call our search for unrecorded liabilities that resulted in an additional accrual of 222,000 of disbursements.

There were no misstatements that were left uncorrected by management.

And I'm gonna turn it over to Shelby to go through the rest of our presentation.

Um in footnote one to the financial statements, you will find the significant accounting policies used by the city.

As described in footnote 18, the city did adopt um GASB statement number one this year, which is for compensated absences.

That um was uh implemented as of July 1, 2024, and that did result in a restatement of beginning net position of around 10 million dollars.

There were no other new accounting policies adopted this year, and we noted no inappropriate accounting policies or practices used by the city.

So, as part of our audit, we do evaluate the city's identification of related parties.

Um, and we did not note any related parties or related party transactions that were previously undisclosed to us.

We also didn't note any significant related party transactions that have not been approved or in accordance with the city's policies and procedures.

We also did not note any significant related party transactions that appeared to lack a business purpose.

We also didn't note any noncompliance with applicable laws or regulations or restricting specific types of related party transactions.

And lastly, we didn't have any difficulties in identifying the party that ultimately controls the city.

So here we um look at anything that could be considered a significant or unusual transaction, and we noted that all significant transactions have been properly recognized in the financial statements in the proper period.

Um then here um there are certain accounting estimates that are particularly sensitive just given their nature in relation to the financial statements.

Some of the more sensitive estimates that affect the financial statements are the allowance for doubtful accounts on taxes receivable, the capital assets, depreciable per depreciable lives, um the actuarial computed pension and OPEP assets, liabilities, deferred inflows and outflows, as well as the pension and OPEP expenses.

Um another significant um estimate is risk management, claims, liabilities, as well as the compensated absences.

And for all of these estimates, we do evaluate them to ensure that they are you know reasonable and in accordance with accounting standards.

The financial statement footnote disclosures are neutral, consistent, and clear.

And we're happy to report that we didn't encounter any difficulties with management in performing our audit procedures.

We also didn't have any disagreements regarding financial accounting reporting with management, and there were no instances that uh required us to seek outside counsel to perform our audit procedures, and we did request certain representations for management in our management representation letter, which is dated December 5th, 2025, which is the same date of our audit report.

There were also no um items that required that we are aware of that uh required management to seek outside counsel or um tried trying to obtain a second opinion on any matters.

Um also here, any um conversations we had regarding accounting principles were in the normal course of business.

And as of the date of this presentation, we are not aware of any fraud, illegal acts or violations of laws or regulations, and there were also no events or conditions noted that indicated a substantial doubt about the city's ability to continue as a going concern.

Our firm does complete the um appropriate sections and signs the data collection form, which is considered a non-attest service, and we are required to be independent of the city um in regards to these services.

However, management is responsible for overseeing these services and ultimately takes responsibility for the services that are performed.

And we are not aware of any other um items that would hinder our ability to be independent of the city, and we also have met all of our other ethical responsibilities as required by accounting standards.

The required supplementary information is required by GASB, and we do not express an opinion over that information.

However, we do review the information to ensure that it is consistent with the financial statements in the ACFER.

There's also supplementary information and other information included in the ACFER, and we do review that as well to ensure that it is consistent with the underlying accounting records that it is from.

So any questions for the auditors?

Okay, don't have any for you.

Thank you for your presentation.

Thank you very much.

Thank you.

We save all our questions for the May.

This is a I want to give you a high-level overview.

When you look at the 2025 results and look at revenues, revenues were performed very strongly for 2025.

We took in 465 million dollars of actual revenues against a budget of 441.4 million.

So we we did 23.6 million better than budget.

And I'll talk about that on another slide, but roughly 9 million of that 23.6 was for one time revenue sources.

And I'll talk about those on a later slide.

For expenditures, we incurred expenditures of 446.6 million against a budget of 452.4.

So we were about 5.8% of 2% of the budget.

So we did fairly well on the expenditure side.

When you look at the difference between actual revenues and expenditures, $18.4 million difference.

That is an increase to our bottom line.

Some refer to that as our surplus.

So overall, we had a good year.

We generated positive revenues, and we were able to add to fund balance of $18.4 million.

What the next line shows you is the net changes and other components of fund balance.

We refer in layman terms that fund balance is our savings account.

We have restricted, committed, and assigned and unassigned, and I'll give you just a brief overview.

Restricted fund balance of those commitments from external sources saying that you can only spend the funds for a specific purpose.

The city receives opiate remediation funds.

Well, those funds can only be spent for specific purposes, and that's dictated by those agreements that we've signed for those funds.

So that's an example of a restricted fund balance.

We also have committed fund balance.

Those are projects or programs that council have approved to be spent for a specific purpose.

So when we don't spend all the funds, we close those projects out to committed fund balance.

And the third category that is assigned fund balance, those are items that council, the city manager or I can designate as assigned fund balance.

And one of those projects that we put in assigned fund balance is the proceeds from the sale of the regional jail, our portion of that.

And the last category is what we talk about mostly is unassigned fund balance.

And this is our savings account that's available for city council to spend.

So when you look at the change of $13.2 million, that means that of the 18.4, we transferred 13.2 of that surplus to the other components of fund balance, which left us 5.2 million that we added to unassigned fund balance.

So we ended the year with 115.1 million dollars in undersigned fund balance.

The very last slide is a five-year trend looking at fund balance, and we'll talk about that more.

But before I move on, I want to see if you have any questions.

Okay.

Vicemair Brown.

So we ended with $115.

Million.1 million in unassigned fund balance.

Unassigned?

Yes.

Okay, help me with that.

Okay.

That is our savings account.

And one of the one of the things that, and why do we need a savings account?

Well, for several reasons.

One is to manage the cash flow for both the city and schools.

We collect taxes at two main times on December 5th and June 5th.

So those are our times where our cash is at the highest point.

But as we spend those funds down, we need a fund balance to help us be able to play payroll to pay on grow pay grant expenditures because we're constantly waiting for the state and feds to have to reimburse us.

Yeah.

Understand uh the fund balance, but I'm saying unassigned means it's not restricted.

It's not restricted.

That's what I want to know.

Okay.

And it's available for council to spend.

Yeah.

Okay.

That's what I'm good.

Okay.

Moving on to the next slide, looking at general fund revenues, budget versus actual.

Um the blue graph, the blue represents actual, the light green represents budget.

And when you look at this slide, it's it's hard to read.

And there's a table at the very bottom that shows you the budget amount, the actual, and the difference.

If the difference is positive, that's very favorable.

It's negative, it's not favorable.

You can see, and what I want you to really take away from this slide is that the biggest increase in favorable variances was in miscellaneous revenue at $9.9 million, general property taxes, other local taxes, and use of money and property.

And we'll talk about those on the next slide.

This slide looks at some of the detailed reasons why we had the positive earnings in our revenues.

The first item is miscellaneous revenues.

There's two one-time revenue sources that we received.

And I mentioned the one previously.

We received approximately $8.1 million from the sale of the Hampton Roads Regional Jail.

That was our proportionate share.

And as you recall, uh the jail ceased operations in April 2024, and it was sold to the city of Portsmouth in October of 2024.

And so we received $8.1 million for that, and that was put in Miss Glenn's revenue.

Basically, it's a re refund of operating subsidies that we paid in the past.

And so those two items, approximately $9 million makes up most of the increase and miscellaneous revenues, and those are one-time revenue sources.

The next category is that general property taxes.

This is our real estate personal property, machine and tools, mobile tax, mobile home taxes.

Those two revenues alone, the current make up about 49% of our actual revenues.

Real estate finished a year with approximately $400,000 over the revenue estimate.

And personal property finished a year, about $1.1 million over the price of the estimate.

So both of them beat the expectations we had.

Real estate slightly, personal property a little bit more.

One of the things that many of you probably experienced that the used car market has been a very challenging market.

And the tariffs have impacted that.

Although the tariffs are on new cars, because the new cars are selling at a higher rate, more people are looking for used cars, and it's had had a positive impact on personal property.

The third area in general property taxes that really had a positive impact is delinquent personal property tax collections.

The treasurer's office does a good job of going after delinquent taxes.

And one of the ways that they do that is filing liens.

And you know, through their systems, they've been able to file more liens per year and therefore collect more delinquent personal property taxes.

We try to anticipate how many rate cuts will happen a year.

We can't always do that to an exact sign.

So we're very conservative in our approach to budgeting interest revenues.

So for fiscal year 2025, we did about 3.8 million better than what we budgeted.

And one of the things that we did before the rates were reduced, we were able to invest about 30 million dollars in a certificate of deposit to take advantage of you know the higher rates at the time.

So those things really paid off positively.

And the final category, I want to talk about other local taxes.

These are where we have a lot of our consumer-driven taxes.

Um business license, one of the strongest performances, finish your year with about uh forming about 1.5 million dollars better than budget.

And talking with the commissional revenue, this was driven by the fact that there were a number of new businesses in 24 that was not really they filed and was not anticipated as a part of our estimate.

So that really had a positive impact on business license taxes.

Well, meals, sales, and lodging tax revenues all experienced positive budget performances.

Now we are noticing a slowdown in those taxes, but they did finish positive for fiscal year 25.

And finally, uh license tax per mutual, these are revenues that we generate at Rosie's.

These revenues perform about 800,000 better than expected.

If you recall in March of 2024, I believe we approved for them to operate uh on a 24-hour basis.

So we're seeing the full impact of that in 25.

So their revenues did 30 or 3% better than what we anticipated.

And so really, really um a positive impact.

And before I move on, any questions that you may have.

Okay.

Okay, this slide looks at general fund expenditures, budget versus actual.

We we break um expansion into three categories.

What we've allocated to city departments, transfers to schools, and transfer to other funds.

Um, and city departments is primarily operating capital costs and personnel costs.

When you look at the 259.6 million dollars that we spent in and city departments, approximately 67 percent of that is personal and friends benefits.

So a lot of what you see we spent, we under spent and city departments by 5.5 million dollars.

Transfer to schools, as you recall, we have a school funding fund formula.

We share 61.83 percent of residential real estate, personal property, and utility taxes with the schools.

So we provided 95 million dollars of local funding to the school system for 2025.

And transfer to other funds, these are transfers to support other funds or legal obligations or commitments to other funds, and the biggest transfer of other funds is what we transfer to our capital projects fund for capital projects and for capital contingency.

We transfer funds to help with the inflationary impact uh of cost overruns and projects.

So in fiscal year 25, we transfer approximately 45.7 million to the capital project fund.

The second largest transfer is to our debt service fund.

We transferred approximately 30.9 million dollars to cover all of our debt service payments.

And the final largest category is we transferred 9.6 million dollars to our convention center fund.

As you may recall, uh City Council dedicated two plus two percent mail and lodging taxes for the operations of the convention center.

So this 9.6 million dollars represents the dedicated taxes generated and for the convention center.

So those are the substantial um largest transfers that we've made to those funds.

So overall uh we finished the uh budget with 5.8 million under the budget, about 2% less than the overall budget.

And I will address any questions before I turn it over to Britney to talk about the government wide financial statements.

Carl, I just had one question.

And sales taxes, and can you can you put that into context in terms of of the budget?

Because I know we were looking at uh deferring some of uh new programs and things for this year, but now we're kind of working our way toward the end of the second quarter of the fiscal year.

I was just wondering what how we're looking in those those revenues from they're not substantially down, and I'm you know what I like to see is what we collect in December.

I like to see a full six months, and I don't have a full six months to report.

Now, one of the things that although those consumer driven taxes may down be down, there may be other taxes that's under overperforming, like lasting license tax per mutual interest income that will offset some of that.

So it's better for me to look at the complete budget revenue picture.

Yes, and I plan to do that for December.

So I I subjective perspective is is that I think some of those other revenues like license taxes and the interest will help offset some of those impacts and those consumer driven taxes.

Okay, thank you.

Vice Mayor Moran?

Yeah, thank you, Carl.

The the 5.8 uh variance on total expenditures, how does that compare to previous years?

Um last year, I believe we had about four million that we did not spend.

So it's it's it's comparable to last year and some previous years.

And and and we're providing the the 9.6 million for convention center for operations?

Yes.

Uh is so is that because of underperformance?

No, no, no.

As if if you go back and looked at how we funded the convention center, um, one of the things that we said when we funded the convention center is that it needed a dedicated tax to help it operate because the operation of the convention center would do operate at a profit.

Right.

And so, and I thought it was an ingenious ideal is to it when they came up with this dedicated tax, it the plan was it was going to cover that service and some of operation, so it will take pressure off of the general fund to have to make subsidies outside of the dedicated taxes.

So this was part of the original structure.

And what's happened over the years, the two plus two has grown so great, it has allowed the fund to operate and have a little surplus because of that.

So the Aquaplex operates similarly?

No.

No, the oper there's no dedicated tax for the Aquaplex.

Okay.

Do you want to talk about the Aquaplex?

What we did for the Aquaplex.

You may recall we had shut down the old Hampton Community Center.

And when we shut down the old Hampton Community Center, we retained some of the staff so that when we opened the Aquaplex, we could take that money and allocate it.

We also had the aqua um aquatic center that was at um what is now the Hampton Police Academy, the former Center Health and Fitness Center, and we took some of that.

Um in terms of the debt service for it, we timed the debt service with when we were paying off other debt, and we also increased the hotel tax by a dollar per room night to help offset the incremental cost of making it a competition facility because we had planned to do a community facility, and there was an inclemental cost, testing my memory now, but roughly 10 million dollars, and that dollar per room night would cover, I'm sorry, about 18 million dollars, 19 million dollars.

I'm forgetting the numbers, but the dollar per room night helped to offset that cost.

So on the debt service side, we never really had an impact to the budget.

It was part of just paying down debt and adding debt, and then we had the hotel fee to help with that.

On the operating side, we basically took what we had in the way of community funding and and moved it over, although there is additional funding that's required because we're running a much larger facility with the outdoor and indoor components.

Okay.

How many more years do we have left on the convention center?

And then we refinance the debt is projected to be paid off in two third of 2035, but we are looking at options of how to defease the debt before then.

Okay.

Yeah, I I ask that every year.

Can't we use that money yet?

Can't we use that money yet?

My last slide is really looking at the unassigned fund balance.

This is a five-year trend analysis of looking at fund balance, and it looks at from 21 to 25.

And you can see that fund balance unassigned fund balance has grown from 80.8 million dollars to 115.1 million dollars.

And that growth comes from the performance of the general fund.

Um when I went back and looked, and just for informational purposes, we uh I've brought you um 12 consecutive years of where the general we've added to the general fund since 2014.

We've added positively to the general fund.

And uh so when you look at this for 2025, our fund balance as a percentage of revenues is 17.1%.

Our policy says that we have to maintain it at 10%.

So we are 7.1% or $47.7 million over our policy, which is similar to what we where we were at in 24.

Um previously, the the purpose of an unassigned fund balance.

It really is help us to manage our cash flow because there are times where cash flow does get low, and so if we did not have the fund balance, we would have to borrow tax anticipation notes.

And back in the 80s, we we did that.

Umseen major emergencies.

Um, if you recall, we didn't spend that much money on this, but when Hurricane Isabel hit us, we had to spend a lot of money on projects before we were reimbursed for FEMA, and that took a while to get reimbursed for FEMA.

So that really helped us, you know, because we had that fund balance, we had the cash flow to deal with that.

And one of the other reasons why we want to maintain scroll on performance and balance is we want to maintain our strong credit rating with the rating agencies, and they look at that.

And so those are really why we want to maintain strong fund balance.

This is my last slide, and I will entertain any questions that you had.

Okay.

Uh hold on, call it Councilwoman Campbell.

Okay.

I great presentation.

Thank you so very much.

The number that you've got on your last slide, stay there.

Do you have the money invested so that it's working and generating revenue while it's not being used?

Yes, we we have an investment and debt manager.

We make sure that our idle funds are invested.

We have the state local and uh government investment pool is a state money market fund that we invest in.

Um we also invest in CDs and repurchase agreements, and we also have a money manager, uh PFM, and we have a program where they buy uh short-term normally securities that's two years or less, and normally mainly U.S.

government securities.

So we do have a program that we have for our bond funds.

We have the SNAP program, the state non-arbitrage program that we invest our bond funds in.

So we do have a program to make sure that we're earning as much as we can on our idle funds.

And do you know about how much that is?

Um for the uh state local government between three and four percent.

Okay, okay.

So let me just also say to the budget team sitting back there.

Um, I am not an accountant, God bless you.

I love you, you're awesome.

Um, I do appreciate all the hard work that you guys put in to do in this budget.

It is magic math, and you guys are wonderful.

Thank you very much.

Okay.

All right, so Brittany is gonna come up now and talk about the government-wide statements.

Thank you.

As Joey's coming up, I just wanted to let you know.

I looked up because I couldn't remember and it was driving me that I couldn't crazy, I couldn't remember.

It was roughly 29 million for the total cost of aquaplex.

About 18 to 19 million was what we had planned for a community center, so it wasn't incremental 10 million we were looking at that the dollar hotel tax basically covered.

Okay.

Good afternoon.

Good afternoon.

I will present on the city's government-wide financial statements.

The government-wide financial statements recast the statements to present the city's finances as a single unit, similar to what you would see in the private sector.

The first table here is governmental activities.

This table demonstrates the growth in the city's governmental net position, which we can also refer to as the city's bottom line.

We've seen significant growth over the last five years.

Most of the increase in governmental activities is attributable to strong performance of general fund revenues, which Carl just discussed.

But another aspect of this is the reduction of debt.

We've paid down $22 million of debt during 2025.

The next slide is to discuss business type activities.

The business type activities include the Virginia Air and Space Museum, the golf courses, the Hampton Coliseum Fund, the Hampton Roads Convention Center Fund, the Wastewater Fund, the Solid Waste Fund, and the Refuge Steam Plant Fund.

This is the consolidated results of the net position of all of those funds.

For fiscal year 2025, the business type activity saw 8.2%, $8.2 million increase in the bottom line.

Most of this increase is coming from the Hampton Roads Convention Center as a result of the 2 plus 2 mil and lodging tax that Carl just discussed.

But another significant factor for FY25 was the wastewater fund.

The wastewater fund performed very well, recognizing the 63% increase in revenue from the prior year.

And this increase is a result of user sewer user and surcharge fees that became effective on July 1st, 2024.

And that concludes my part of the presentation.

Are there any questions?

No questions, Brittany.

Thank you.

Unless they're so no other questions for the staff.

I think that's the conclusion of that.

So, city manager closing comments.

I was going to go to the next item.

They are consistently the winners of the GFOA Award, which is the highest recognition you can get for municipal accounting, as Carl said at the outset.

People have no idea how much work it goes into producing not just a CAFR, but all the work that leads into making sure the CAFR gets an unqualified opinion.

And so we're very, very appreciative of them.

So thank you again.

Great job.

Thank you.

And last but not least for open session today, we wanted to give you a preview of the retail incubator program we're going to be getting beginning at Peninsula Town Center.

I'm pleased to present Lavina Jones.

I think this may be the first time she's actually presented to council.

I know you all have met her, like when we went on the Phoebus Partnership field trip, but we are so delighted to have her as a senior manager for innovation entrepreneurship and small business development.

And one of the very first programs she was asked to start to work on when she came on board was the retail incubator program.

So she's going to be giving you a preview of that today.

Thank you.

Thank you.

Good afternoon, Mayor Gray, Vice Mayor Brown, members of the City Council, City Manager Bunting, and City Attorney Sid Noor.

As Ms.

Bunting stated, my name is Lavanya Jones, and I serve as the senior manager for innovation, entrepreneurship and small business for the Department of Economic Development.

I spent the last 20 years of my career helping entrepreneurs build capacity, find opportunities for innovation, and also obtain venture capital investment.

Most recently, I served as the founding entrepreneurship faculty at Dr.

Molly King's Almomano Morehouse College.

And I also serve on the board for Sur Thrive Startup School and the International Advisory Board for Village Capital Impact Investing Fund.

So as a Hanson University alumna, I thank you for the opportunity to be back at my home by the sea and to present our department's plan for the retail incubator in the Peninsula Town Center shopping center.

On today's agenda, we will cover the overview, background, and rationale for the need of this retail incubator, the retail incubator's mission and objectives, scope of work, structure, curriculum, program timeline, governance and accountability, how the retail incubator will be evaluated against our defined success metrics, and our next steps for launching the inaugural cohort.

From merchant boutiques to artesian shops, specialty retail has historically played a key role in shaping the City of Hampton's cultural identity and economic vitality as one of America's oldest cities.

However, like many cities across the country, the City of Hampton's specialty retail sector has faced many challenges over the last two decades.

The COVID-19 pandemic specifically further accelerated these challenges as long-term leases for brick and mortar spaces became too expensive for smaller retailers as they were just starting out and testing their product line, as well as confining them to operating from their home.

As a result, the city of Hampton has gained a significant growing network of creative home-based businesses run from living rooms, garages, and kitchen tables.

In response, the retail incubator in the Peninsula Town Center will provide home-based businesses a pathway to sustaining a brick and mortar operation, as well as providing affordable space, targeted mentorship, technical assistance, and a supportive ecosystem to make sure that these home-based businesses have the tools and resources to successfully transition to a more permanent brick and mortar operation.

In addition to the Department of Economic Development, some of the other anchored partners in Peninsula Town Center suites will include the City of Hampton Convention and Visitors Bureau and Hampton City Schools.

These are the suites that we have leased in Peninsula Town Center.

If you look from the right to the left, you will see that the Hampton Convention and Visitors Bureau will occupy one of the end suites.

Then on the left, Hampton City Schools will occupy two suit, and the city's retail incubator will occupy three of the center suites.

Hampton City Schools will utilize the suite spaces that they have been provided to provide students within the academies of Hampton, educational opportunities to design, launch, and operate real businesses.

So to give some background and rationale for the need of this retail incubator, the market has informed us that home-based businesses really bring new ideas, cultural authenticity, and a highly personalized customer experience to the retail landscape.

It also informs us that consumers' trends have shifted towards unique artesian-made and locally sourced products, and customers are increasingly seeking goods that are sustainable, authentic, and tied to community identity.

However, home-based businesses lack access to affordable retail space across the country, have challenges building a consistent customer base, and operate without back office support and the mentorship they need to scale.

Home-based businesses also tend to be unfamiliar with merchandising, point of sale technology, and inventory management systems.

The Peninsula Town Center Retail Incubator addresses a significant gap in the City of Hampton's entrepreneurial pipeline as it allows businesses to shift to a more structured retail environment and strengthen the economic fabric of the City of Hampton.

The retail incubator and Peninsula Town Center will also revitalize underutilized commercial space as a hub for emerging creators and makers in the city.

It will create a shopping experience that feels distinctive, community-rooted, and attractive to residents and visitors as a cultural and economic destination space.

Lastly, this retail incubator in Peninsula Town Center will send a message that the City of Hampton values entrepreneurship, creativity, and communal ownership in its economic growth.

The mission of the retail incubator will be to transform home-based businesses into sustainable brick and mortar retailers by providing them affordable space, targeted mentorship, and a supportive ecosystem that nurtures entrepreneurship, strengthens the local economy, and celebrate the City of Hampton's cultural identity.

We'll achieve this mission with our objectives to support the transition from homes to storefront, promote local ownership and cultural identity, and drive economic revitalization.

And these pictures here, you can see what the space is currently look like prior to renovation.

These are the retail incubator spaces that are in the center.

So the scope of work since my start back in August, been here four months now.

Research and planning has been going on and will continue to go on through the end of this month.

We've also been working on the overall setup of the retail incubator in Peninsula Town Center.

Then we will go into the incubation and launch processes, which will go through December 2026.

Lastly, after that inaugural cohort, they will receive ongoing support, monitoring, and evaluation through December 2028.

For the structure of the retail incubator, we will select three to 18 businesses each program cycle using a cohort model.

They will go through an application process that will evaluate their product alignment with our lease restrictions in the Peninsula Town Center, their market readiness, entrepreneurial commitment, and their growth potential.

They will sign a 12-month lease with the option to renew and also go through 12 months of programming.

And lastly, after that 12 months of programming, again, they will receive two years of ongoing support to make sure that they can transition successfully to a brick and mortar permanent brick and mortar operation.

Eligible businesses for this retail incubator.

Can you go back to that slide?

Yes, sir.

So just so I was clear.

So the you sign a 12-month lease with option to renew.

Yes.

And then two years of ongoing support.

So does that mean the business could potentially be in the space for three years?

Or is there ongoing support after they exit the incubator?

It depends on their readiness to be in a permanent location.

We'll give them that support if after 12 months they're ready to be in a permanent space.

We'll still have that ongoing support to monitor them.

As far as the lease renewal, that is something we're still working to define as we kind of see get applications and see where the businesses are that we're getting applications for.

And then you mentioned that one of the things that many of the home based businesses lack is uh point of sale technology.

Yes.

So is that uh technology equipment that we're going to provide at the incubator or would they we're not going to necessarily provide that equipment uh but as they are entering in, we're going to give them information on how to obtain that equipment before they settle into the space.

Okay, thanks.

Yes.

Mr.

Mayor and Council members, I want to clarify too.

Um the 12 plus month lease was that really meant to be.

We expect them to be there a minimum of a year.

Okay.

But if someone is making progress and isn't quite ready to move out, but they've been making progress, we would can we would basically renew at least.

The two years of ongoing support is once they leave, we're not going to stop holding their hand.

Okay.

Because I I realized there was some question yesterday when I was meeting with some pairs about what that really meant.

Um so I just wanted to amplify talking with Leonard.

We we we hope that people can move out after a year so we can bring in new people.

But if someone's not quite ready and they need another year, we wouldn't kick them out.

Right.

Okay.

And then how how many, based on the suites that we have, and I was looking at all those.

So how how many, how many business businesses can we accommodate, excluding what schools and HP?

Yes, so we have three suites.

C D and the we have three suites in the size of those suites, we can comfortably fit six businesses in each suite.

Okay.

Okay.

So the eligible businesses for the retail incubator include gift items, home decor, clothing accessories and shoes, candles, fragrances and soaps, children's clothing, handmade curated items and art, as well as we can do packaged non-perishable foods.

However, based on our lease restrictions, the ineligible businesses for the retail incubator include dining establishments, entertainment and sports related businesses, service-related businesses, as well as certain retailers like control substance retailers, newsstands, adult materials, consignment discount stores, and books.

Be willing to commit to 12 months of training and coaching, and also we wanted them to have two years of 6% sales growth so that we can confirm that they have a customer base for their product and they'll be able to maintain the inventory for the space on an ongoing basis.

Thank you.

This is exciting.

How do you track progress for incubating business to become self-sufficient?

How do you how are you tracking that?

I have a success metric slide while I'll be able to do that.

Okay, okay, good.

I'm ahead of you.

Go ahead.

No problem.

I'll wait.

I'll wait.

Any other questions?

I'll wait.

Okay.

And these are just some examples from other similar retail incubators across the country around how we're looking to organize the space that we have.

So the curriculum that we're looking at after doing some research on different curriculums for retailers across the country, uh, we settled on over the 12 months.

They will go through the topics of retail industry and product cycle, customer service and sales, business operations and leadership, branding and marketing, finance and access to capital, and resource and supplier management.

The timeline, we're looking at a targeted date of February 2026 to fully launch the incubator.

Leading up to that time, phase one, we have our recruitment and selection process, which will take about one to three months.

Of course, depending on the scale of applications that we receive.

Phase two, the pre-incubation where selected participants will be provided some preliminary materials to review before they settle into the space.

And then the program launch and incubation will run for this inaugural cohort six to 20 months.

And last phase will be the post-incubation where they receive that additional support and monitoring.

Councilwoman Harper has a question.

Yes.

Hi, thank you.

I have a question about the space.

So with just one business be in the space, or will it be a shared space?

It'll be a shared space that we're hoping.

Being that I'm new to the area, I'm not sure the scale of applications that we'll get.

So that's why I gave the range of three to eighteen.

We have three spaces that if we have a big enough retail that I could fill it, home-based business, we could put one business in the space, but we can also segment it to where at a max comfortably we could fix six businesses in that space.

Okay, gotcha, gotcha.

Thank you.

You're welcome.

Any other questions?

Okay.

So governance and accountability is extremely important when we're dealing with incubator spaces and shared spaces.

So for governance and accountability, we're looking at agreements and vendor relationships, will be managed under the municipal authority and in compliance with local City of Hampton ordinances.

The retail incubator core team will provide quarterly reports to the chief officer for community and economic development on some key performance indicators, which I'll talk a little bit about in a minute.

We also are looking to have an annual impact report that will showcase the impact of the incubator.

And along with putting together a working group, because I am not a retail expert, I'm a business expert, but not a retail expert, putting together a working group with the retail incubator leadership will review program data and outcomes annually and make recommendations on how we can continuously improve the program for the retailers that we serve here in the city of Hampton.

All participants will sign agreements drafted by the retail incubators core team in consultation with the city attorney's office.

Agreements will outline responsibilities, rental terms, performance requirements, and clauses to protect the city of Hampton from liability.

Stakeholder feedback loops will be created to ensure consistency of experience in the retail incubator space, and an established crisis communication plan will be developed in coordination with a marketing and research team to ensure coordinated and timely messaging in the event of extreme weather like we had recently this week.

Also, retail incubator participants will be required to maintain proof of insurance, general liability, product liability where applicable, and workers' compensation if they employ staff prior to occupancy.

Some of the minimum benchmarks that we will require to continue participation in the retail incubator is in that 12-month period, only missing two trainings, attending all coaching sessions.

So if they miss a culture session, making sure they take the responsibility to reschedule that coaching session, complete two technical assistance meetings in that 12-month period period, and complete program milestones in their own monthly reports.

The monthly reports that the retail incubator participants will be required to submit will document their sales, revenues, and some other industry standard financial data, such as the percentage they're spending on, rent and payroll and things of that nature.

So evaluation and success metrics.

We have four categories of evaluation success metrics that we're looking at.

The first category is business and participant success, which will measure uh whether their incubator business is growing based on those financial uh projections, how they're sustaining, do they have a sustaining plan for their business, and are they gaining the skills needed for long-term success in a retail space?

The also some city economic development success measures, the fiscal return on the investment, and the impact on the city of Hampton's retail economy, community and visitor impact, measuring how the retail incubators plan a role as a community and tourism destination, uh, strengthening the city of Hampton's cultural and economic identity, and last but not least, reporting and accountability, measuring transparency, accountability to taxpayers, and continuous improvement of the program.

So did that answer your question by Ms.

Brown?

Okay, great.

And our next steps of after this presentation to launch this incubator is to make sure we formalize the retail incubator governance and leadership, um, being the working group, finalizing the budget and partnerships that we'll utilize to support the businesses that will participate in this retail incubator, complete site preparation and renovation, complete the incubator branding and curriculum, being more detailed in those 12 months with those topics that I outlined, as well as launching the retail incubator with the target date again of February 2026.

And so with that, I thank you so much for your time and consideration, and we'll open up for any questions.

Councilman Bowman.

Thank you for the presentation.

I'm very excited.

I think it's something that we really need.

I've been talking about incubators for maybe like the last five years, and uh so finally it looks like we're coming to fruition.

But um just have a question.

So it seems like we have a program that's gonna be set up and you walk right into a business, but what about setting the business up, like the zoning and permits and occupancy and all of that?

Will that be a part of it?

Because that is a big part of opening a business, and we can find out where the red tape is.

Okay, we'll take I don't think you need that, so nothing like an extra perspective.

Uh good hours, good afternoon, everyone.

My name is Leonard Sledge.

I have the privilege of serving as a chief officer for community and economic development for the city of Hampton.

Thank you, Lavanya, for the presentation.

We do, to your point, Councilman Bowman, we do hear consistent feedback about the challenges that small businesses have in terms of understanding our processes to go through permitting to go through the business licensing process so that they can get their businesses open as swiftly as possible.

Entrepreneurs are experts at what they do.

We're experts at the at the governance piece and and the practice of our processes.

And so through this, we will through this and other work that Lavanya and Ray Ransom, who's also on our on our small business team are doing, we will have continual um uh workshops with our community development department also with the treasurer's office, with the commissioner of revenues office, so that we can systematically help small businesses understand the steps necessary uh to get through how do we get to opening.

Uh and so while while not specific to this retail incubator, it is an aspect of our work that we're working on.

And one of the one of the upcoming presentations at a later council date, uh, we will be sharing with City Council uh the framework by which we by which we're looking to stand up uh the small women and minority on business advisory council, which will hit on a lot of those key points as well.

Thank you very much.

And if I could be of any assistance, I would love to help your team.

So just let me know.

Thank you very much.

Thank you.

I'm gonna step back down to reality now.

Mayor.

Okay, uh Councilwoman Muggler was next.

Then Councilwoman Harper and then Vice Mr.

Thank you, Mr.

Mayor.

Um just a quick question about kind of the I guess the logistics of the point of sale and all of that.

Um, since there will be multiple businesses in the space, uh, will each individual business operate their point of sale or will there be one uh one point of sale that all the businesses in that particular space share?

All the businesses will operate their individual point of sale system, and we're looking at this being a cashless space with it being an open retail space.

Oh, what kind of a space?

Cashless, cashless.

Yes, yes, ma'am.

Okay, thank you.

You're welcome.

Councilwoman Harper.

Thank you.

Very good presentation.

I'm excited about this as well, because we have quite a few home-based businesses of people who do live in Hampton that could definitely benefit from this program.

Um I got a question about the marketing.

How are you all gonna market this as far as letting the community know that you know this is out and if you know where they can apply and and definitely be considered for um this?

Yes, we're definitely going to be using a lot of the partners that we've been working with, such as the small business development center, which just had a home-based business conference.

Uh, we tabled at that conference to connect with some of the community uh retail alliance.

Um we plan on doing some community workshops to really get out because again, new to the area, so I'm learning the business community so that we can make sure we market to the people uh that are in the city of Hampton as well as our social media.

Okay.

Yes, ma'am.

Thank you.

Councilwoman Ferry.

Thank you, Mr.

Mayor.

Um, I also echo the uh sentiments of others, um, council members.

I'm very excited about this, and thank you for such comprehensive presentation.

My question is a little bit more broad.

Um are you at all tying in with the reactor?

Um, I know that the reactor is um focused on technology innovation.

However, we we definitely want the technology companies to stay in the area.

So I'm I I guess I'm kind of wondering is this in parallel with or is there an opportunity if a um if a tech startup gets to a certain point, is that something where they might flow into this, or um what what's the what's the tie um looking at a larger uh perspective on this?

So as as discrete items, uh the the technology, the acceleration of technology companies uh in the city is it's still in our small business, our swam uh footprint and objectives, particularly the commercial the greater commercialization of technology from NASA Lanley Research Center, Jefferson Labs, and people who just have great brilliant ideas.

The retail incubator speech space is a little different.

Lavanya's role as our senior manager for innovation, entrepreneurship, and small business, it all ultimately rolls up to her.

But I I don't think we have the expectation that a small business that is a part of reactor will take up space in this retail incubator.

They are being incubated, accelerated, so to speak, through reactors program, and Lavanya is working hand in glove with the reactor leadership to help ensure that there are opportunities for those businesses to continue to grow in Hampton.

And those businesses in reactor or the home-based businesses, many of them have some simple similar challenges and opportunities in terms of how we support them through the business licensing process, uh, understanding processes, zoning, certificates of occupancy, identifying spaces for them to grow, and also connecting them to other resources as well.

Thank you.

You're welcome.

Vice Mayor Brown.

Yeah, thank you.

Lavon did also learn I I and Council Councilwoman Harper asked my question about advertising and marketing for this particular project.

But uh my my question is is this limited only to home-based businesses?

Is it limited to only home home base?

Yes, based on the lease agreement, we have some restrictions on the type of business and retail we can have in the space.

Is there any expansion for businesses already established but may need office space and workout space in the future?

That's an issue.

That's the problem too here.

Yes, so businesses that are already existing in brick and mortar space uh that need to grow no different than we do with other existing businesses.

We do work with those businesses.

Uh Vice Mayor Brown, and it to echo comments that I shared previously.

Any business that's looking to grow, our our responsibility is to help to provide them with with support services and information so that they can go from space A to B and their growth, get connected to resources, understand our processes.

Again, what Lavanya and Ray are tasked to do along with other members in the Department of Economic Development is to figure out how we keep businesses growing and thriving in the city.

And and the other thing, and I I didn't hear anything about uh helping them with business plans.

Yes.

So that would be a part of the business and leadership section of the curriculum.

Okay, I didn't see that.

Okay.

And and and finally, uh, because you're trying to get them to become self-sufficient and get a brick and mortar busin building or whatever you want to do.

Uh by them saving um uh by then not having to have rent, correct?

Is there they pay rent?

There will be some nominal rent, small, but it's a small rent.

Wouldn't it be something you like they move into a brick and mortar space and okay?

So uh is there any um conversation about how they may be able to uh save some money and put money aside uh to build up some capital to eventually uh get out the nest.

Yes, so that's also a part of the capital access section of the curriculum where we'll really go deep into their financials and what they need to be at to scale.

Part of those financial reports, we have some industry standard information on where a specialty retailer should be after a year, five years, and so we'll be measuring the business against those standards to help them get there.

Good.

Thanks.

And Vice Mayor to amplify what Lavanya shared with those points and with prior points.

The partnerships and collaboration that we have with other organizations in the Hampton Roads region are critical for us doing this.

Organizations such as the Small Business Development Center, the SBDC, which operates out of the Hampton Roads Chamber, but serves the entire Hampton Roads region.

We work collaboratively with them.

We send businesses to them to get assistance with their business plan formation, thinking about these things.

Lavanya mentioned the retail alliance as well as being experts through our partnership and engagement with the Main Street program of which Phoebus is a designated Main Street community.

We're not just looking to leverage our internal expertise but external expertise as well.

Organizations such as Black Brand, which held their Gala week here in the city of Hampton, a host of partners and resources.

Well, I I want to commend uh this effort.

It's something that in the echo of Councilman Bowman.

This is something we've been wanting to do for a long time.

We had incubated years ago, but not to this degree, not to this level.

And so an echo um all the members of council who've spoken on this topic.

It's just an exciting day for the city, and I wish you well.

Thank you all so much.

Thank you.

Councilwoman Campbell.

Thank you very much, Lavanya, for doing a great job.

I'm not done yet.

Get back up there.

So sorry.

No, uh, this is really great.

I'm really excited.

So um since you said you're opening kind of in February, do you have a pipeline of businesses that are already queued up to get started?

We've been doing some um visiting to some of the markets that have been happening um since I got here in August.

So we did some stops at Hampton University's Market Day for their homecoming, uh, the Phoebus holiday market.

So we do have some businesses that we've been talking to that have shown interest, and then also as I stated, um, the small business development center has a list of home-based businesses that we'll be leaning into to reach out to see if they will be interested in participating.

Yes, ma'am.

Okay.

All right, any other questions or comments for the team?

Okay, thank you.

Great presentation.

Thank you.

All right, so that concludes all of our presentations uh for the afternoon.

Um there any regional issues.

Uh any items for new business.

Okay, with that, I'm gonna ask the clerk to uh read the required motion for closed session.

The motion required is to convene a closed session pursuant to Virginia Code Section 2.2 3711 point A point one to discuss salary supplements for Hampton's constitutional officers and appointments as listed on the agenda and the performance of appointees to a local commission.

All right, so you have motion and a second for closed session.

So moved, Mr.

Mayor.

Second.

Do you call a roll, please?

Councilman Bowman.

Vice Mayor Brown.

Aye, Councilwoman Campbell.

Aye.

Councilwoman Farabee.

Councilwoman Harper.

Aye.

Councilwoman Muggler.

Aye.

Mayor Gray.

I okay.

We will convene and close session in the Lawson Conference Room at uh 2 50.

Uh, following the closed session, council will reconvene an open meeting.

Council will reconvene the open meeting in the same location in order to certify the closed session and then proceed to adjourn that meeting.

So with that, we are adjourned from the afternoon session.