Now call to order.

I'm going to just call the names of the board members that are here.

Please say your names.

Louis Palacio present.

Eugene White.

President.

And Kyle Martada present.

At this time, the chair recognizes the quorum.

And the finance committee, Dr.

White.

Yes, uh the uh five committees to adjourn the finance committee to open all a special meeting.

Uh and so the finance committee will uh be adjourned until we complete our special meeting.

He'll re-sat still we will reset you're okay, and we will convene a public hearing.

Yes, Campbell, would you please be present for the 2026 library budget?

Good morning.

Um, I'd like to invite um Mr.

Mike Water, he is our advisor for a long-term plan.

He's gonna review our long-term plan prior to me doing the budget.

Good morning, everyone.

Good morning, Mike.

How are you this morning?

Good, thank you.

Good to see some familiar faces from last year.

Um this is obviously without saying been the most interesting year I have experienced in my career in terms of legislation that was passed and trying to sort through the details of that legislation, and um each each unit I work with is somewhat unique.

The legislation doesn't affect everyone, everyone the same way.

And so I'm gonna take a little bit of time just to kind of uh get the highlights of uh the legislation that was passed that's going to impact your budget directly.

And um, and before I start, I also want to say that we were hopeful to uh have the uh 2026 assessed valuation certified uh for your material today, but unfortunately it has not been yet.

Um the legislation has delayed many counties from being able to get the August 1st deadline.

That's normally the deadline for certified assess valuations, uh, but unfortunately we don't have that data for you today.

So we'll be working with an assumption, and when we get the uh actual number, we'll report that back to the board.

Uh but um I'd start off by saying that was probably the most active legislative session.

I had seen in quite some time.

Um early in the session.

Um I met with the director of the county association, and his name's David Larff, and he and I were having a conversation of just how things were started, and I said to David, I said, you know, this feels like a train to me, and nothing seems to be slowing it down, and his comment back to me was interesting in that he said he's been doing this a long time as well.

He said, you know, this feels like the last weekend of the session, and it is the end of January, and so uh, and and there was internal fighting, it wasn't like uh uh politics as usual.

This there were there were a lot of internal battles going on, uh trying to figure out what they were going to do, and just to kind of hit those highlights.

Uh the governor uh came out early on in Senate Bill, the first version that came out, uh, had some pretty steep property tax cuts in it, and there was no replacement revenue that came along with that, and so uh that concerned a lot of people, uh including the Senate, and there were negotiations going on between the governor's office and the Senate.

Um, and ultimately then the Senate came out with a revised version that really wasn't going to cut property tax and go backwards, but it was going to limit all the future revenue going forward, in that we were not going to get any new revenue in property tax in year one, and then one percent in year two and three percent in year three.

So they were trying to control property tax by limiting future revenue so different model than what the governor had proposed, and again, in the Senate version, their version there was no replacement revenue and in that model, and the governor uh was not happy with that model either, and so then it eventually bounced over to the House and uh Representative Thompson, who's chair of House Ways and Means had his own version that he'd been working on for a while of what property tax reform should look like, and I will tell you it is a pretty complicated piece of legislation uh that that was in that uh language.

And Representative Thompson's chair of House Ways and Means had his own version that he'd been working on for a while of what property tax reform should look like.

And I will tell you, it is a pretty complicated piece of legislation that was in that language.

This is a credit of up to 10%, or excuse me, 10% or up to $300.

And that was new.

And then that was then included in Representative Thompson's bill, and ultimately, I believe what brought them together to pass the bill.

And it all happened pretty quickly.

Once that happened, it passed, it didn't go to committee.

Like I said, it felt like a train early on, and that's kind of how it went through.

They immediately passed it, the governor signed it, and then they began to do some revisions to it right away through through a DLGF bill, Department of Local Government Finance Bill started to fix some things that were not going to work.

And so if that kind of sums up the session, it was by far the most stressful set session for me because I had a lot of clients asking how this is going to impact me, now that's going to impact me.

But it was all moving so fast going back and forth, it was almost, and it was even hard to project even after it was passed.

All the nuances of the language.

So to give you some idea, that's taking away a large piece of the tax base, and means there'll be less ability to tax.

Then so you calculate the tax bill so that if it's this $300,000 home, their maximum tax cap is three thousand dollars with the circuit breaker, unless there's a referendum that goes beyond that.

But then that $300,000 house would then get a $300 credit.

So in some cases, we ended up now below the one percent circuit breaker in terms of what the liability is on homes.

So that was a big piece that was involved.

And they also implemented a new deduction for the properties that were in the two percent categories, and the two percent really means rental property and farm ground, those are the two categories that that were impacted.

Uh and that starts at six percent next year and will grow to 33 percent by 2031.

Again, another loss of assessed valuation on the tax base.

Farm ground was reduced.

Now, not a lot of farm ground left in Mary County that would sway things one way or the other, but farm grand was impacted dramatically in the sense that they reduced what's called the capitalization rate, uh, which dropped the assessed valuation on a per acre charge by seven percent.

But then they did in addition got a six percent deduction for this new deduction, and so you listen to a lot of the rural communities, they're going to be hurting because a lot of their tax base, which is farm ground, is being lost to this new deduction.

And so you listen to a lot of the rural communities, they're going to be hurting because a lot of their tax base, which is farm ground, is being lost to this new deduction.

And of course, in Marion County, there would be a lot of apartment rentals or property rentals, and so that will impact certainly the library.

Um whether that actually trickles down, I don't know.

You know, some of these large corporations that own multiple rental properties, you know, will they reduce rent as a result of this new deduction?

Maybe questionable, and maybe on a smaller scale, they might, but nevertheless, uh, they're going to have a new deduction that they've not had before.

So time will tell with that.

Um my first boss said this to me years ago.

The only fair tax is the one someone else pays, and that's kind of what we're doing.

We're moving pieces around to see who the payer is going to be, and I will say there's going to be more of a commercial more of a shift to commercial property in the last two years because home values were increasing so rapidly.

It was shifting the burden from commercial to residential.

Now, this model will start to shift some of that tax burden back to commercial, with one exception.

They also took a big swipe at business personal property, in that uh in the year 2027.

Um, any business that has two million dollars of personal property or less will no longer be paying property tax on that personal property, which the threshold before was $80,000.

So that will take in a lot of small businesses that won't won't have to pay business personal property tax.

A lot of larger corporations that have large personal property inventories, they'll still be paying.

Uh that was originally supposed to be a million dollars in 26, but they took that out because that was one of those cleanup bills uh that that they came back through in the DLGF.

They simply didn't have enough time to redo that.

So again, that was that's another swipe at the tax base, and so we're gonna see in the modeling is that we're actually going to lose assessed valuation, and tax rates are going to go up.

That may sound strange, but they are expecting that.

They're actually expecting tax rates to go up between now and 2031, but all depend on the payer and what that assessment and what their own individual assessment does.

Another big piece that this is something that we'll definitely want to watch, is that they made a fairly significant restructuring of local option income tax.

Now, you don't get a lot of local option income tax to fund your budget, but you do get about 3.8 million dollars that's used to reduce your property tax liability, it's collected through local option income tax, and then they replace a portion of your property tax with that.

That goes away.

That doesn't happen, and so your your property tax levy will not have that deduction started in 2028.

By the way, all this lit change that I'm just gonna describing takes effect January of 28, and so the county will the city council and county count, or they'll have to adopt a new rate between July 1 of 2027 and October 1st of 27 for what's going to happen in 28.

I'm gonna show you I'm setting you this all up so that when you see your numbers that it's going to make sense, like, oh yeah, well, we got to focus on that, and we've got to focus on this.

So that that's a pretty significant change in your in your modeling.

Um although there is some good news in that, as I mentioned, some of those bills that were passed earlier or considered early on, had no property tax replacement credit or no replacement revenue in it.

They have said that the counties can adopt up to 0.05 lit rate for libraries, and so that's actually significant amount of money.

I'll talk to you about that.

Now, I'm not sure you're going to get them to adopt that much of a rate, uh, and you're relying on a very little small portion of the current COVID revenue right now.

But another place that we're probably going to want to have a lot of conversation between now and 2027 about where the library fits in into this new whole lit model, and will they um adopt a lit rate high enough to help you make up for what you're going to lose in this new property tax credit that I mentioned.

That property tax credit, by the way, starts in 2026.

That is going to be a pure loss of revenue in 2026, and I'll show you that in a moment as well.

So pretty significant restructuring with local option income tax.

I won't go into all the details, but just know that's how they intend to address libraries.

Now, in your case, you're a countywide system, and that rate is would all be up to you.

And other counties now they've changed the modeling of how it's distributed to if it's not a countywide library system, the money that's collected from whatever the rate is that the library the county adopts will be distributed based on population within their libraries, and I will tell you that creates winners and losers because the current model works for some and not for others, but when you purely go by population, you'll probably hear libraries start to scream saying we can't have that formula.

So if you go to a library association meeting, you're you might hear concern about local option income tax and how it's going to impact them.

In your case, again, unique to you is you have this what's called levy freeze, this 3.8 million dollars can use reduce your reducer tax liability, and then you have this COE piece that you get.

Those will be the two pieces in this new lit model that we'll have to work through as we as we go forward.

So that is in a nutshell, what was a really active session, and um so what's this look like for you?

Um I'm gonna start with, and you might recall me talking about this in the past.

Let's start with this page to provide some history, and I apologize, there's a lot of little numbers on here, but uh it's because it's averaging six years, so it goes way far back.

I'll try to make it a little larger.

There we go.

Maybe that's a little bit better.

So for a number of years, this actually goes back to the last property tax reform that we went through in like 2008 and before that we have been basing how much property tax we've been able to collect on what's called the six-year non-farm personal income factor.

The state did not want property taxes going up faster than what the income of the state was going up, and so that is the model we operated under for many years now, and so uh that was the philosophy back then, and to Bureau Frank, for the most part has worked pretty well, but in recent years, um, when uh the income started rising uh much more rapidly, it started generating.

So, if you go back to 2021 here, you can see the income in that year uh jumped 10.1 percent as a state, and that was the COVID year, right?

So there was a lot of new money put into the economy, and so incomes rose that year, but even the year before in 2020, 7.2 and 10.1.

Well, what that started to do is drive that average up pretty rapidly, and they didn't like that because they were trying to limit property tax, so they put a conditional statement in that basically said we're gonna we're gonna use that calculation, but then we're gonna apply 80% to it, and then if that 80% is greater than 4%, we're still going to limit you to 4%.

And so for many many years, we operate with the six-year non-farm personal income factor.

We get into these high property value years, and they start they they just almost move away from that formula altogether and just say it's going to be four percent, and that's what and that's I'll show you in your calculation the maximum levy for that now.

So this is a reconstruction of your maximum levy, maximum levy, meaning the amount of property tax that you can collect in your general fund, how you operate that is by far your largest source of revenue to operate the library system, and so this factor is really important.

So, if you were to use that previous chart I had, you would have followed these these percentages directly back to those six-year averages.

But then we got into 24 and 25, and now 26.

Okay, so this is the new number.

They said 4%.

So they just kind of overrode that formula.

Now, that formula goes back in place and starting in 2027, but don't count on it because I would anticipate in this next legislative session, they are not going to allow property taxes to increase over five and a half percent again.

Because I would anticipate in this next legislative session, they are not going to allow property taxes to increase over five and a half percent again.

That's the way it's currently written is that that we would go back to that.

So again, they just kind of overwrote it here.

Now, in an important piece on here that I've highlighted here, remember me mentioned that 3.8 million dollars.

What would happen is your maximum levy was computed with this reduction in it.

And at the end of the day, what would happen is we would subtract 3 million 854, and it's been that number for many years now.

The county collects enough in local auction income tax to make that number stable, and they've always used that then to reduce your liability.

But you can see this year from this year 59 million going to 60 65 million, that's a big percentage increase.

So that's going to impact your tax rate, and it's going to look kind of rough on paper.

So I'll show you, I'll show you what that looks like in a moment.

Um so those are a couple things that um that is unique to you.

Um the assessed valuation.

Now there are a lot of schools that have engaged policy analytics to do a parcel by parcel analysis of the tax base.

Um so they can for one uh estimate what their referendum revenue is going to be, uh, and two uh if they're issuing debt, how much tax base they're going to have to issue debt.

Um, I don't know that that's necessary for the library system yet at this point for 2026 because there's just not substantial change happening in 26.

It's going to really mess things up for you.

Now we may I may be coming back to you next spring saying, hey, we might want to engage them.

Go ahead and do this parcel by parcel analysis because now we're starting to see more things play out.

Um, and you know, I would also say that this next session is still going to be pretty active.

Now, Representative Thompson has been out publicly saying this to associations.

Don't expect massive changes to the framework of what we've just passed, but you can expect adjustments.

So I think the framework is what you're gonna have to work with.

But what those adjustments might be, it may be good or maybe bad.

We just don't know obviously how that's going to play out.

I would anticipate that we're gonna have a lot more conversations about local option income tax, and maybe it looks different for libraries at the end of the day, but but nevertheless, but on the assessed valuation, this was the piece we were really hopeful to have for you this morning.

Um, I believe then I vote checked this morning that the website is still not posted, but we really were hopeful that we would we would have the 2026 number for you, but we don't, and so uh what I have done is I've seen um uh a model of a school district in Marion County and used kind of similar assumptions based on the blend of that the makeup of the property in that district, and kind of soon to be kind of similar to what might happen countywide, but this is not a parcel by parcel analysis.

This is just a model to show you like if the assessed valuation drops to one percent.

This is what it'll look like going forward.

But what you can see in 27, it's it's a little higher than normal right now.

Right now, we're going from a 37 and a half percent supplemental deduction to 40 percent.

That's just not that big of a leap in one year.

That's not a big the next year.

We go from 40 percent to 46 percent.

That's that's a bigger bump of assessed valuation we're going to lose, and so and in you and I mentioned business personal property.

That's going to be the first year that we're going to have that two million dollar uh threshold that anyone below won't have to pay.

So we we could lose a lot more assessed valuation in 27, but then we go to the modeling of really the supplemental homestead deduction growing, and we also have the growing deduction for rental property, and so again, right now I don't I don't think that we need to go to that study, but we might we would get a little farther down the road.

Um tax.

By the way, we will get you a fiscal plan when we get this new certified assess valuation.

As soon as it comes out, we'll we'll get you a fiscal plan with that final number in it.

Uh, to today, by the way, is just a public hearing.

There's no action on the budget required of you, so it's just to hear information about kind of where everything's kind of going with this, and Lilita obviously is going to present in greater detail your actual budget and what it includes.

I'm showing you a model, just kind of projecting out what this might look like going forward.

Okay.

Now, local option income tax where I have not spent a whole lot of time talking to you about this in the past because you you have such little that you generate from the county on this, but I want to give you some idea of what.05 would be going forward if the county were to adopt.

Now this information actually is known countywide.

Um that the rate in Marion County is 0.0202.

Now, over time, the county uh the county changes the mix of how that rate uh what's made up of that rate, but for quite some time has been limited to the 0.0202, and that revenue in 2028, I'm forecasting based on the current last known year 23, uh about 757 million dollars.

Okay, so that's a 2%, a little better than 2% rate.

You would be able to collect 0.05, and so if the council or county were to adopt the maximum rate as it's currently stands, that's 18.7 million dollars for the library.

So that the good news is there is a lot of capacity there for you to be able to make up maybe some of these potential losses.

There are some libraries that are not going to be able to do that because it's going they're gonna get a distribution based on population.

The point zero five might be enough in total, but the mix of it and how it goes out to the library is going to be different.

So again, everybody's affected, just a little bit different.

But I just wanted to give you some idea of what 0.05 is, and so you know, I can't tell you what this rate's going to look like in 2028 because will the county try to make up some of their loss to the credit in that year, and so there this is this is the difference in the house version.

They kind of they're kind of pushing people towards local option income tax away from property tax into income tax, and so that's the reason they put pretty significant changes in this.

So now I will tell you there are there are no lit dollars for schools.

Schools really took a pretty good hit in this session.

That they had the credit losses and and they're gonna lose referendum dollars because the AB is going down, that loses ability to issue debt.

Um, but there's no ability them for them to adopt a local option income tax to replace any of that revenue.

So you might hear schools screaming, or you might hear schools running referendums early because they're gonna be trying to make up for the dollars that they uh potentially will lose.

Um but again, big changes around local option income tax.

Now I'm gonna show you real quickly page 15.

So in 2028, this is the current makeup, and this is going to change.

We've been notified that it's potential changes coming yet this year, but this is the current makeup of the two percent.

You only get you only get to participate in what's called the COE portion, and of the co portion, so in 28 if it generates 711 million dollars, the co app portion is about half of that.

Excuse me, Mike, what do you mean by the court portion?

Uh, so this 2.02% total rate for the county, then is made up of COED, uh, a little bit of athletic uh athlete revenue, the levy, the low it freeze, remember we mentioned the low it freeze where they're using some of that for replacement of property tax, that goes away in 28.

But the whole makeup, who I it's so hard to speculate the county might do with the rate in 2028.

I've heard no conversations about what that will look like, and so you have all the this these each one of these titles represents a piece of these two point the 2.02 rate, and in your case, though, you only get a small sliver of the top line.

This low it freeze, you get, but it's replacing property tax, so it's not you know, it's not new revenue to you, but you get 0.2 percent of this coat portion.

So the reason I'm pointing this out in 2028, right now, I'm estimating that you would get about 700,000 if they continue just to give you the same percentage.

But if they were to adopt the 0.05, remember we mentioned the 18 million dollars, so that's just to give you some idea of what you're currently getting versus what's what could be available to the library, and so as we start to look at uh some of the forecasting, that will be part of the conversation because there is the ability to make it up, unlike property tax, you you don't you don't have any control over property tax other than the debt fund, you control the debt fund, but on the general fund that's frozen, you can't go beyond that four percent, whatever that six-year factor is, but um but on low it lit, the county controls that and there is capacity there.

So, to give you um to give you some idea where where we might be focusing our energy in the future.

Uh so with all that said, that's hitting all the the highlights.

Now we're kind of gonna look at the summary of it in your in your modeling of a lot of numbers.

I apologize.

Um, start um I start right here.

This line right here is the most important line on the page, and the reason is it says excess deficit revenues over expenditures, and this tells you whether your budget has been in balance or out of balance, and what you can see here is for the last several years, we have been in balance, and based uh based on your uh current spend spending through June 30th.

I'm anticipating that we will still see some gain in cash balance yet this year.

It's after that where it gets a little uh gets a little cloudy, and what I mean by that is um there's two things happening in 26 that are going to make things a little different.

You see this new line up here, loss from property tax credits.

So that's the million and a half that I'm estimating.

There's some of the loss will be taken in the debt fund, some of it will be taken in your general fund.

Now that's another thing to watch, because I don't think that was intentional.

Circuit breaker loss right now, today is all taken in the general fund, and the debt fund takes no loss of the circuit breaker right now.

The way the law is currently written, the loss from the credit is some taken in your general fund and some taking in your debt fund.

You would rather have it that way because your your operating funds that's that's your that's the golden egg you want to protect the debt fund.

You can actually raise if you wanted to make it up.

You could raise that levy to make it up over time.

I would anticipate that will be a conversation that they will probably try to push that back into just the general fund.

We'll see on that.

So that number right now is just a portion of what you would lose.

Um, but also in 26.

The reason this looks pretty uh rough in 26, like the budget's out of that's we also have 27 pays next year, just the timing of it.

About every seven years, we run into a year where we have 27 pays, and so we're a typical year we have 26 pays next year because your payroll timing, there will be 27 pays, you're going to have more expense in a year, and so I've tried to model that in, but then show you that it goes back down, you know, then it would go back down again some in that next year because you wouldn't have 27 pays every year thereafter, you'd have a period now that you wouldn't have um uh you'd have another seven years or so before you run into that again.

But um, when you go back and look at your history, you're in a you're in a strong cash position, and that's what you'll hear me say.

You're in a position that's going to buy you time to see some of these things play out.

You are not going to have to take a need-girth reaction to what's going on.

You're going to have to react, but not a knee jerk reaction because you're in a you're in a strong cash position to get through this.

Uh so when you look at at the end of 24, uh, we ended with 45 million dollars in cash, probably um be similar to that again this year.

Then you see it drop pretty good in 26, uh, partly because of this new circuit record credit and partly because we've got 27 pays.

Uh still leaves it, would still leave us with 34 million dollars.

I've always said to my clients, people ask what's a good cash balance.

I always look at the next year's property tax amount, and so you have 59 billion dollars and you have 10 million dollars of circuit breaker loss.

So you're collecting about 50 million dollars net real property tax.

If you had 25 million dollars in cash, if you had 50 percent of that, what that does is it gives you from January to May June when you get your property tax settlements in, and so that that's a good cash flow.

There's a lot of people that are well below that and aren't even close to that, and they have to borrow what's called tax anticipation warrants, and uh borrow against their operating pay back by the end of the year.

So uh the point being though that uh you're in a strong cash position, and yes, we have it.

We have a higher expense here that we're going to see in 26, and we have it have that new deduction.

Um, then also you see here you see that 3.8 million dollars zero out.

It really isn't affecting this number, it's only affecting this property tax number.

You can see the property tax number shoots up, okay.

So in that year, and so it revenue wise, it's not affecting this bottom line, but it is going to impact your tax rate.

Um moving on.

Um this is the debt fund.

Now, this is going to be a new conversation we're gonna have.

I think a lot of places are going to be having this is I I think will be part of this legislative conversation, what just happened uh in the past for many years now, since at least um going back in this history, we have always focused on a tax rate in this fund.

We have said 0.0318 is the maximum rate that we will collect for debt, and we have managed that.

I think that goes back to even maybe when you did central library with the big bond issue that you had made a rate commitment at that time.

It was pre-me uh being involved with your your your uh planning process, but nevertheless, we have always managed to this 0.0318, and I would say that that's where we that's what we will be requesting for 2026 is 0.0318 again.

Yeah, the assessed valuation is going down a little bit, but we're not into those steep years where it's going down, and so we would only issue enough date a debt to manage to that tax rate in 2026.

So there's no plan at this point to go over or make any rate changes there, even though this valuation is going down, but you can see with the assessed valuation going down, there's less revenue there, right?

And you can see this property tax credit in here, it's a new loss in this fund.

That's the one I'm not sure it's going to be there next year.

I think that might get moved to the general fund, and this may be zero, but we'll see.

But here's one of the conversation I think we need to change with the community and with the city county council is that even though our rate may be going up, we we might want to consider saying just give us the same levy, just give us the same levy every year on the debt fund.

We can no longer make this rate conversation because the assessed valuation is dropping, and they're expecting rates to go up.

But you'd be saying the community, we're not asking you for more.

We didn't decide who's going to pay it, right?

They've got all these pieces moving around.

We didn't decide who's going to pay it.

But as a community, we're just asking for the same amount as we got last year.

And so the conversation now changes, in my opinion.

We'll see, time will take.

In my opinion, I think we it will become a levy conversation.

We're going to ask you for 4% more in the general fund, and we are going to ask you for the same amount in the debt fund.

Or maybe it's a slight increase in the debt fund, but you will become more about the levy conversation and not about who's paying it because it'll it'll vary who's paying it, depending on how this all plays out between now and 2031.

So that I think you'll start to hear in 27.

As people approach their budget process in 2026, 427, I think you're going to hear a lot of units then talking about levy, not tax rates so much.

Um the next page is what's your library improvement reserve fund?

You have a nice cash balance here.

Uh, you're really not spending this money.

This money's really reserved for capital and nature type expenditures.

We actually gained a little cash at the end of 2024, and the reason we're gaining cash, we're not putting more money in it from the general fund, but we are gaining some interest in this fund.

It's being credited to this fund.

So the interest income is being deposited here.

We have budgeted a little money, but we've not been spending it.

But you can see what I'm doing with that interest over time.

Obviously, they're they're trying to drive interest rates down, and probably will happen over time.

So I've tried to factor that into the modeling.

I don't know how quick it's going to go down or go up, but I tried to account for some of what's being portrayed as future rate decreases.

So but nevertheless, um, this is money beyond your general fund that that is available to you.

So again, um, another cash reserve.

And then we have the rainy day fund.

Um, we again have not been moving any money recently into this fund.

We have in the past, that's how the that's where this money came from.

This money was built up from general fund dollars in previous years being transferred in here.

Um, and so at the end of 24, we had we had a gain of 325,000.

We had some interest that we we deposited into this fund.

So uh at the end of 24, uh, you have about 8.2 million dollars.

We do appropriate some dollars in here.

We used to use this fund kind of as a cash flow.

We'd need money before we got the money from the bonds for the projects, and sometimes we pay for expenses out of here, and then we get in the bond, we'd reimburse ourselves.

Um, but again, you can see what I'm doing with interest is like, yeah, we're gonna this year we'll still have some pretty good interest, but over time, I think we'd start to see that decline.

But again, this is cash beyond your general fund.

This is more flexible than LERF.

LERF is restricted really to capital and nature type project or uh expenses.

This could be for beyond that, it could be it can be used on some of your operating expenses.

So again, the theme being you're in a strong cash position.

Now, here's where it really kind of looks ugly going forward is tax rates, and again, I think they're expecting this, but if our assessed valuation goes down one percent, hypothetically, if it goes down one percent, our general fund rate, our general fund levy goes up four percent, our debt rate stays flat.

That's still a rate increase in this year 3.78 percent on, but then you can see what the rate increases are going forward, is that it uh the percentages look pretty crazy.

Now, policy analytics has done a number of studies across the state, and I think that's what's being discovered in a lot of these models.

Uh they might be a little surprised by how quickly tax rates might start going up in in 2027.

Will that cause a reaction?

I don't know.

Um, but um, but that's what some of the modeling started to show our higher tax rates.

So that model shows on your bond rate going up.

Is that to keep to the levy?

Yeah, so basically what I did.

That's that's a good point, Russell.

Is this this model is showing that rate where we're 0.0318 this year?

Remember on that revenue or some summary page I just said, let's just keep the same levy.

We're gonna ask you for the same exact levy.

Well, the same exact levy with the lower assessed valuation causes that debt rate to go up.

Now, maybe you won't do that.

That's this is just to model out what would be like that if you were again saying, hey, community, we're just asking for the same amount of money, we're not asking you for more.

Tax rates may look strange to you, but we're not asking for more.

That's a result of all the Senate Bill One changes.

So that's a lot.

I wish it were simpler than that, and I can tell you it took a lot of people a long time, even after it was passed to work through the details of this, and so just know for 26.

Um, you know, what Lilita's going to present to you later, can we fund it?

Uh can be funded.

We've got additional expense built in there, we've got the credits, and you're still going to be in a strong enough cash.

You wouldn't have to do anything in terms of cutting expense.

Now, I will tell you just looking at expenses through June 30th this year.

You the library's done a good job of holding some of those expenses.

Anything we hold today will obviously help for future.

So the expenses for the first half of the year look really good.

Mike, thank you so very much.

My pleasure.

You told you started us off with the metaphor of a train.

And then you gave us an option to really understand the some really important understandings of the losses of assessed valuation.

You helped us understand more about the local option income tax and what's going to affect us there, helping us to understand about the possibilities of levy.

Thank you so very much.

Let's make sure that we ask any questions that are from our public.

Anyone want to present any comments?

If there's no one that wants to present a comment and there are no questions whatsoever, any of the board members, any questions?

Please.

Thanks.

You summarized a moving target one to digest, and two to put it together and lay that.

Well, thank you again.

Oh, yeah, no, thank you.

So the evaluation of library, do you have an expectation of when that may happen?

I I really thought, I actually thought they were going to hit the first deadline.

I'd heard through someone else that they were on track, and so something must have happened.

And I don't know what that means, don't know what that is, but I would expect it any day.

Marion County's always been really good about getting it done on time.

Again, there are Mary County's not alone here.

There are the majority counties are not certified yet.

So was that the point two zero two right?

No, that's excuse me, two different two different topics.

So the cust valuation will affect your budget for 26 in the sense of tax rate.

Uh the two the 2.02.

Um we had received notification that they're looking to change the mix of that this year.

But that's that's not impacting you dramatically because they're still trying to keep the amount for the levy freeze that 3.8 million in there because that doesn't have to go away until 28.

But they they might try to bump a little more into the code where that's the flexible money, so we might get a little more there, but we'll have to see, but they ultimately pass.

So that is something on the table.

Um, but it's working under the old model.

And 28, it's I don't know what they'll be looking at.

So which one is the way that they have to that we're waiting for?

Is it the next or is it something else?

Uh so we're waiting on the assessed valuation from the which ultimately is the county assessor to the county auditor to certify to us, and then that's that's what they'll work our budget off of that, and then the city county council has to decide the makeup of that 2.02 rate.

But I don't think there's going to be anything in there that's going to adversely impact you.

If anything, it might be a slight improvement because they're trying to take some excess dollars they received inlet and move them to more flexible dollars in code.

So I'm sure they're trying to help their budget with that as well.

So that might be a little bit better.

It's not going to be anything dramatic for you.

But change the mixture.

Yeah, it'll it'll change the mix a little bit.

Um, you're looking at those numbers if I paid this back on the losses.

I think it goes as like a general sure, those are compounding losses, right?

Because yeah, that's when you're so this is just a model, and every I would say because you're uh it's it's it's a model to try and pick up excuse me, some of those trends.

And this is what would be called a structural deficit, meaning that it's not growing back, it's not it's not closing it, right?

If you want thing if you had a negative balance or a negative forecast, and then it was closing to a positive.

In this case, it's modeling is growing, and so there's a structural problem there.

But whether we can address that with either a change in the lit in 2028 to make up for some losses that we're experiencing from Senate Bill, or will we have to start to cut some expenses?

But I'm not suggesting because of your cash position that you have to go to that measure at this point.

But each year, as we update this model, the whole idea behind it is like when we actually start to see a negative, you know, we actually spent more than we took in, then that's when we got to start like all right.

How you either gonna increase revenue or you gotta decrease expense or accommodation.

I don't know how to say this, but the $18 million sort of potential is put in the point.

Yeah, that would be year to year, right?

Like that would be here.

So that's where you're saying okay, even if we're seeing 10 million 12 whatnot, yeah.

We still have that potential.

Yes, and that would be growing too as income scroll because it's a rate.

So but that again that becomes a little more political, right?

Because when you start talking about rate increases of that, that that becomes uh more difficult conversation.

So we we over the years have tried to request a larger portion of the co it pie, but obviously they're struggling with their buttons too, trying to balance them.

So that's a zero sum game, unless you raise the rate.

I don't think people want to raise that rate right now.

Pleasure.

Any other comments or questions?

May we have a motion to close the public hearing?

So that's part part of what we just found.

My pleasure.

Thank you again, Mike.

Very much appreciated.

My pleasure.

Good morning, everyone.

Good at all.

Okay, good.

I'm here today to do a budget presentation for our 2020 twenty-six budget today.

And Mike went over you know all these numbers and what our future will entail and all that good stuff, and I hope that everyone feels more comfortable knowing that even though we may have a deficit in the property tax revenue that we are going to receive that our cash balance can cover and home investment for a couple of years, or more, you know, but until we figure out what's going to happen in 2028.

So here, you know, of course, we have our mission and vision.

And here are some key on budget days.

So in our last well, last task above financial um committee meetings.

I try to keep everyone abreast of what's going on with the bank and so they know what's going on right now today.

That's when the board will adopt the budget, and hopefully by 10 by then we may have our access valuation, and um, and if numbers change or anything like that, we will cover it with that cash balance, you know, if there's a greater deficit in the revenue that we're predicting that we might have.

Okay, um I thought I'd put this in here because you know, our funding has to follow our uh strategic plan.

I want to um congratulate our my colleague McKenzie.

She did such a great job putting this together, and I still have her slide right here.

So I just wonder what kind of some of the information is to know.

This is part of yours, but um, because our uh funding has to follow our strategic plan, I just want to remind everyone.

Um this is our strategic um plan, and that if you haven't received this, um we're gonna have some available for you so you can review the detail of our strategy plan.

So let's see if we have more people than most.

I don't want to go into the detail of the bath because I know Mike took up 45 minutes, and um I will try to get through this.

Um also we have our community impact for 2024, and I kind of stole this information for an in your report that very more kind of yeah.

So this information is in here if you like to review that if you need one on y'all.

But as you can see that we really made an impact to our community in 2024, so we um invest in our impact.

And how do we invest in our impact is by this information right here?

Um here are our library funds.

So we have our operating fund, and we have our debt service fund, and we have learned and rainy day fund.

My environment over the birth, the library improvement reserve fund.

Um, but I just want to remind everyone these are some more funding that we have for the library.

Then the other funds are like the contractor funds, parking garage, share system.

We also have the bond fund that we received to cover the capital projects, and then the custodium funds will be the plaque cards, staff association, and our uh wonder pro foundation.

I was gonna tell Roberta.

Thank you for making sure we continue to run our programs and also our payroll liabilities.

Excuse me.

And then we also have a gift and grant funds, which are donations and grants, primarily for the programming.

And this is our proposed budget for the 2026.

Um for the 2026 is for operating, it's a little over 67 million for the 2025.

We're at um a little over 62 million, which is um uh uh increase of about 8.25%.

And our debt service, you'll see that if there's a decrease because our 2017 bond, we paid that off.

And so there that's why there's gonna be a decrease, even though we're gonna get a 2025 um bond uh later on this year.

So you'll see a decrease of 7.22 percent in debt service, and then the rainy day and life stayed the same because um we really didn't really um utilize it much this year, um, and we also are earning interest while that sits in there.

So the total um 2026 budget is 89,394,474, and totally um it's a 4.64% increase, almost one percent.

And this was advertised on August the first and the 8th in IDJ and um the Indy Star.

Mike kind of went over the um the tax rate history, and again, this may not even make a difference when it comes to 2028, but as you can see, um we're started back in 2020.

I think um with central the central branch was being built or something like that.

That's when the conversation was held that we'll continue to keep that rate, and that's what we did most of the years.

Um as it um as you know, the years go past the 2028, that is not gonna make a difference.

We're gonna try to um advocate for just the same amount that we do get instead of the tax rate.

So uh I know in the past we've been advocating for more lead.

Um right now we're not gonna advocate for more lead, we just have to pay them for the replacement of the funds that we're gonna lose in the future.

So some of our budget focus is you know, equitable access.

Um, that is from our uh strategic plan.

Um we can continue to invest in health and wellness uh through innovative programs, uh, strengthen our organizational framework, continue to increase collaboration with share assistant partnerships, um, adapt library services, um, leverage technology and improved services for the veterans, uh, retain and group um talented and diverse exceptional skilled workforce and provide a welcome, inclusive, accessible and safe environment at all of our branch locations, and of course the community smart uh support and partnership.

And I thought I'd put this in here, and some may have seen this in the past, and I found this is like this is a good representative of what we received from the um from our property tax um distribution.

So as you can see, we're just a small little part of the pie.

Um, everyone receives a greater portion of it besides the library.

You see what we're saying right there of that dollar, down a little bit more dollar, and that's two tenths of that dollar that we receive from the property tax distribution.

Um here are some of our revenue challenges, and uh Mike Rodin really went through this about the SB1 fiscal impact.

Sorry.

So for the SB1 bill, it was predicted, you know, that's the property tax relief in the business, property tax exemption, and local income tax changes.

Those are the details that Mike went over.

But if you look down here in 2026, we're predicted to lose 2.035 million dollars.

And in 2027, 1.1 million dollars.

However, in 2028, we're predicted to receive 2.2 million dollars.

And this is one of the things that we really don't know if the calculation is correct, and that's why Mike said it might be something dealing with the way they're moving things around, and that's why we haven't received our assessed value yet.

But once we see those final numbers, then that can you know give us more detailed information, and hopefully we get that soon.

Um that was due August 1st, so um typically Marion County is never late, but this time I think it's just trying to finish, you know, the final calculations.

So the M the ML GQ that has been kept at 4% for like the last 4%.

So I mean four years.

So in 2025, we have 4%.

We're going to keep it in 2026 as well.

Um the circuit breaker is estimated at 20% of the levy in 2025.

Um last year it was 17%, so there's a little increase there, and it probably will stay at 20% until probably 2028.

But we'll see when the final notes come through.

This is just an estimate that Mike and I kind of came up with, and this is where we're going to calculate our property tax that uh written that we may receive.

And of course, there has been no work in the levy freeze and that would change in 2028.

Um in the past, we have really kind of advocated by the uh the lead shares, sort of my shares to protect other mayor county.

I mean other counties, you know, connecting Mare County.

Um, however, you know, we do know that that's gonna be eliminated in 2028.

So right now we're not gonna advocate for additional lent, we're just gonna advocate for uh replacing the revenue that we are losing.

Um here are some uh 2026 challenges that we're gonna have for our expenditures.

Um, of course, we have increasing personnel costs because we have um pay rate increase that we implemented this year in 2025, and we're gonna give a raise in 2026.

Um we also implemented the good wage initiatives, um, which um that is great.

Um so we just have to be able to sustain this, and we also um address some depressions, and then you know, in 2026, we have 27 pay dates.

In addition to that, we also have Sunday premium hours that we have to take in consideration and also think about um opening additional branches on Sunday.

We haven't made a final decision on that.

That's just some of our assumptions right there, and then with the increase of pay rates that also increase our workers' compensation liability insurance that increased over 14%.

So we have to keep that in mind, every time it raises um, you know, that our workers' compensation liabilities are increased.

So we uh budget for this in the future, so we do know that's gonna happen.

Then recently, I'm not sure if everyone heard about the Senate in Road Act number 409, where um chapter 20 of it is where employees absence to attend certain meetings where that child or children um is paid for, and I think we get one day out of a year per child, so we that's the increase of liability to the library.

So card time.

So I deleted some of the beginning, so I fixed that later.

So again, this is the set and road act.

So that's another that's increase our liability.

Then we also have security services expenses have increased over time and then the housekeeping service expense has increased.

Then we of course we got a factor inflation as well, and then meeting the demands of the e-resources that have continued to increase as far as in circulation.

Then we also have the lack of flexibility due to high fixed costs, and you know that is what it is, and you know it just happens like that, and then we have ongoing costs for technology and transfer towards software as a service.

So here you'll find a trend where we have the 2024 actual so compared to our 2025 current adopted budget, and then a 2026 proposed budget.

That's the arrow right there.

That should be 2026 proposed budget.

So you'll see that the revenue has decreased over time.

So this current revenue year we have 57 million next year, it'll be about 50, about 55.6 million.

So we're gonna decrease.

But you know, in the meantime, what we do to ensure that we keep our expenses low, we review um contracts to see if we can renegotiate down, uh look at um invoices as they come through to see if there's an error to ensure that we're not overpaying for invoces, um, and then to continue to um negotiate any other um contractual services that comes up.

So those are things that we try to do to keep the state uh good stewards of our funds as they come in.

So um I wouldn't predict that we have to cover 12 million, um, but we're gonna do our best to uh keep that deficit low lower than that, okay.

Again, for the 2026 um estimate revenue it is 55.6 million, but that is 81% of our budgeted revenue um with our 4% growth, and then um then our circuit record credits.

Um those credits have been established from 2024.

There might be a little difference in 2026 where we predicted that that'll be 11.3 million, which is um which increases our blocking uh revenue coming in, and then for an intergovernmental um revenue, that's gonna stay um kind of flat, just it has a little slight uh decrease, but we may have an increase in COE as Mike indicated, but it's not gonna be a great increase.

Um there uh receipts we have like charts for services um that might have a slight um decrease, but we are predicting to have um more revenue coming in for events community because of the increase in the charges, and I believe that the schedule is booked out for 2026 already, or getting close, and then um then our interest revenue, um, although we earn um a great interest in it, but um the the interest will decline after that.

Um so we're just factoring that into our um budget as well, but I predicted maybe um by the 2026, it might be a decrease of maybe 0.5 or 0.

Um 75% in the interest and for the 2026 estimate expenses again that's also 67.2 uh million, and that includes the staff raises, um possibly for the increase in health insurance, but we're currently in negotiation right now with them, and hoping that we can decrease that and maybe stay the current same rate that we have in 2025.

Um of course the supplies we have increased um due to an inflation there, and um covered everything like that besides we also have an increase in utilities all that I mentioned before.

So then here we have the 2026 budget that's uh service fund.

Um so you'll see in 2025.

We're currently working on a bond for the West Indy innovation, which is gonna be about 15 million.

And however, I don't have the payment in there because I don't know that yet, but that would be included in the 16.9 million that we have to pay out for 2026 for the bonds.

So although we do receive we still have to make payments on that every year, twice a year.

And this is the slide that uh bank attending provided during their presentation at the board, the last two pass boards, June and July, I believe it was.

So this shows that um our payment per year and how it declines every year, which is great because you know we're we losing revenue in other places, so uh it'd be great that we don't have to pay so much out in debt, but although it's happening else out with the capital projects, but it's good to see a decline as the years uh go high.

Um again, this is the remaining budget for the 2026 budget that was um advertised on the first and that um another uh million dollars for rainy day, and that's been the same for the past three years, and then left we all have 125,000 dollars in there, and that's the same as this year.

Um used to be 250, but because we don't typically use that much, I just got it at 95,000.

Um I kind of talked about the long-range plan.

So I'll put this in here just so you can see that um or any cash balances for 2023 all the way up until 2028.

Um you'll see like a decline, but these are just like structural deficit model, um, things we change um again because incorporates appropriations and uh you know um expenses, you know, that we have um flow and then revenue that we may accuracy in the future.

So this is just a real snapshot of that.

I know I went through 27 slides real quick, but do you anyone have any questions?

Any questions at all easy money?

Um your visual about food uh potential revenue, and you listed fees and services.

Is real rental part of that, or is that someplace else?

Um the fees and services.

Well, with what we're charging for the revenue, where is that in the revenue?

Yeah, that is like small showing on the high chart.

Sorry, yeah, so um that would be in other receipts, and as you can see, the other receipts or our other revenue is like four percent of the high question.

Any other comments or questions?

I don't mind please mic.

Do you know when the contracts for the security and green housekeeping expired?

Um I believe they expired this year in December, is that correct, Adam?

Yes, any other cover, um it's uh very uh advantageous to have the ability to uh transfer expense from capital projects to bonds in terms of you know uh renovations, all right.

That's a good position to be, and I think that that's something that we need to uh kind of emphasize to the public, not many organizations, uh schools and other type of organization would have built and uh looking at the bond uh reduction schedule also dictates uh what you can do and how you can keep that pattern going.

So I I think that's very impressive.

But it's it's a good thing to be able to do.

In addition to that, we're able to transfer um expenses.

There are a couple of projects that are operating to the bonds, and that frees up operating funds if we're become tight.

I just paying expenses.

I just think that's such a big advantage, and it helps on your bottom line on your expenses, especially your salaries and those other things that come up.

That's something we need to uh emphasize, and that comes from a strong pattern of fiscal responsibility.

Yes, and so that's good.

And that's why um I want to tell the community and staff that we don't plan on um you know laying off people or anything like that.

I think that's been a rumor, and I think because of our strong financial uh balance that we're able to uh to carry this on at least a couple you know two or three years to determine you know what 2028 and further would look like.

I'm hoping that uh we will get replacement right again, and so we're just like but we also need to thank you for managing our strong cash balance as well.

That makes a big difference too.

Thank you again to you both for all the work that you've done and putting in.

Thank you.

And it's not just us, it was our predecessors as well.

So I'm so you know, thank everyone that's been in this position.

So is there a motion to close the public hearing?

So moved, second, very good.

The motion has been moved and seconded.

Any other frame of discussion?

We'll now have a roll call to approve the closing of the public hearing.

And also we want to welcome our new colleague.

Please introduce yourself.

Good morning, everyone.

My name is Matissa Woodard.

I am, as she stated, a new member of the board, so I am catching up on a lot of the information being shared.

I look forward to working with you and serving the public.

Um, at this time, I probably have a lot of questions that I'll reserve for a private session, but I'm looking forward to uh serving.

Thank you.

Welcome, Lady.

Thank you.

And she says help us with our roll call, please.

Uh usual roll call, Angie Gilbert's not here with that.

So please just say your name and present.

Close here.

So we're closing the public hearing.

Okay, approval proceeding.

Eugene White approval closed.

Thanks, Mr.

Calvin McConnell and Pat Pang.

Thank you.

As chair of the uh finance committee.

One more second the public hearing is closed, the special meeting is requiring.