All right.

I'm going to call to order the city council workshop for Monday, February 23rd, 2026.

Clerk, if you could do roll call for me, please.

Council President Ertic.

Here.

Vice President Squire.

Here.

Council Member Cass.

Here.

Councilmember Ertman.

Here.

Councilmember Miller.

Here.

Councilmember Nino.

Here.

Council Member Who am I missing?

Williams.

Here.

Isn't we do have a quorum?

Okay, thank you.

And because we have a council meeting at six o'clock, lay down some ground rules at a hard stop on the presentation by 5 30, so we have some time for questions and a hard stop at 545.

And we're gonna call up Todd Teaves from Ailers for a presentation.

Thank you.

I'm uh Todd with Ellers, and uh been has been a while since I've been here, but our firm assists you with principally your economic development work, but we also do uh quite a bit of uh work in the space of financial planning, uh levy limits, uh forecasting of tax rates and levies.

So what I've been asked to speak about tonight briefly is uh if you had a data center project in the city, what would be the impacts in terms of tax levy and tax rate?

And there's a short slide deck if we can have that brought up.

You should be able to use the mouse, Todd, right there in front of you and just advance.

There we go.

So you're I'm all sure I'm sure you're all aware that the city operates under levy limits.

So at the most basic level, levy limits means that the city cannot increase its general operating levy over the prior year uh by more than a percentage equal to your net new construction in the prior year.

So this system is set up uh to allow you to increase the levy if you have growth.

It is not set up nor does it factor in increasing cost to deliver services.

Uh so this is a challenge you face every year with your budgets, uh navigating levy limits and being again limited to that net new construction.

There are many other adjustments to levy limits.

The most notable one is your debt service.

Uh so general obligation debt service is always exempt under the levy limit law.

So whatever your basic operating levy is, uh you get to add that debt on top of that.

So, what do we mean when we say net new construction?

Uh, this is determined by the Department of Revenue.

Uh, they certify that percentage that is available to the city each August 15th when the values come out.

And what's important to understand is that net new construction, it doesn't matter whether it happens in or out of a TID.

If it happens anywhere in the city, it contributes to that net new construction percentage.

And basically it's whatever is added in terms of new real estate, uh less anything that may have been removed within the prior year.

So as an example for uh the most recent valuation cycle, uh January 1st, 2025.

So this was the number that impacted your 25 levy for the current budget year.

Uh you add about 130 million in new construction, and that was equal to 1.63 percent of your uh total value.

So that was the allowable increase uh in the city's levy last year prior to uh debt service and other adjustments.

So a couple quick concepts before we sort of talk about uh the scenarios in terms of what a large project does uh to your ability uh to increase levy and the impact on the rate.

So the first is a levy carry forward.

Generally speaking, when you have net new construction, it's a use it or lose it proposition.

The exception is there is a five-year carrier carry forward provision.

So, in other words, if you uh had a lot of net new construction in one year and you didn't want to take advantage of all that in a single budget cycle, that will roll forward for a period of up to five years total before it drops off of the back end.

There's a variety of rules that apply to that in terms of the voting requirement.

Uh, there's some restrictions on how much debt you have outstanding at the end of the prior year versus the current year.

Uh but the important takeaway here is it's a user or loser proposition with a little bit of flexibility to roll some of that capacity forward uh for five years, but after it falls off that five year uh cliff, that is permanently gone at that point.

The other thing that I want to talk about as a concept that will be useful as we think about scenarios is uh the TID closure adjustment.

We're using 42 as an example here because it's the area in question.

And what the uh TID law in the levy limit law says is that when you close a tax increment district, whatever the final valuation is, uh that is taken, it's divided into the tid out value for the city on the same uh valuation date, and that creates a percentage.

So in this example, if you had development occurring TID 42, it was worth a half a billion dollars at the time that the TID closed.

We're using your current TID out equalized value of just short of $8 billion.