City Clerk.

All right.

We don't want to start at 0731.

0730.

Vice Mayor, are you on line?

I am Mayor, thank you.

Great.

Okay.

With that, uh, we're gonna say welcome to the Mesa City Council study session for February 26, 2026.

Oh, that's a good one.

Uh Vice Mayor Summers is participating by Zoom, otherwise, all city council members are present.

Uh today we're gonna hear item one A, a presentation on the fiscal year 2026-27 general, governmental and utility fund principles, priorities, and forecasts.

Brian and Chris.

It's your show.

Good morning, Mayor.

Thank you.

Mayor and Council.

Uh we will be this morning pretty uh kind of kicking off the uh fiscal year 26-27 budget process with the city council with an overview of our financial forecast uh for the five um five years.

And so with me is um Chris Olby, who is also a deputy director with the OMB, and he will be helping out with the presentation.

So first I wanted to start off with the homeowners comparison.

I know we've we've seen this before, but just want to kind of reiterate that even with the uh the with the budget that we have and the forecast that we see, uh Mesa is uh still the uh third um most affordable city within the valley that we compare to.

And so we have been there for the past um several years, and we continue to be right there, right in one of the most affordable um cities.

And so what I wanted to kind of go through too is just to remind council of what is included in the homeowner comparison.

So what we try to do is take what a homeowner in Mesa Um, what they spend, what their costs are, and if they went to a different municipality, what would that cost be comparable to?

So what we include is pro the property tax, so the primary and secondary property tax.

So as mentioned, Mesa does not have a primary property tax, but we do have a secondary property tax.

What also is included is the city sales tax um calculated by applying each city sales tax rate to um some statistics, and what we look at is kind of what is uh an average household in the city of Mesa, which is about 2.1, 2.5.

And so we take the sales tax and calculate it that way.

And then also we take the three major utilities solid waste, water, and wastewater.

And what we do is we combine those to come up with the um our homeowner comparison.

And if you go back to the previous slide, that's where those different green, the different colored um bars are is so as mentioned, Mesa does not have a primary property tax, but you see, most of the the other uh municipalities do have a primary property tax.

Then we got the secondary property tax, the city sales tax, solid waste, water, and wastewater.

So we take all those, combine it and see how we compare to our neighboring municipalities uh in the valley, uh, and also Tucson to see if you wanted to pick up from Mesa and move to a different uh municipality.

This is how we would compare.

So moving on to the financial forecast, uh, just a general overview.

Um we forecast for five years, and so what we do is we take the current expenditures and expenses and revenues along with historical trends, but what we also use is a um software and um data from U of A.

It's uh the forecast project out of U of A, and we take that data, but then also we we take a look at the city of Mesa's data, so we drill down into our own data and put it into the uh software and then go ahead and um forecast that.

We are conservative.

Um wanted to kind of highlight that a conservative multi-year forecasting approach, which allows the evaluation of sustainability of programs and services.

So what that does is what we're able to do is when we show you a five-year forecast, we're also going out a little bit farther.

But what that does is so and we're able to look at the forecast to see is there any expenses, revenues, things like that that we need to um plan for to where we're not making a judgment in one year the next year, but then the next year after that, then we have to make a different type of judgment.

So if we had a revenue loss and then we we have to cut services, but what happens if that next year that revenue comes back or we have an increase, are we gonna add service?

So what we try to do is forecast out so we can plan how that forecast will look in the future and be able to sustain our services over the long over the long period.

So going into the revenue forecast, as I mentioned, we use some statistical software applied in-house, but then we also collaborate with the departments, such as the utilities development services to see how the permit revenues are coming in, and other um other departments to for their fees and charges also.

Some of the relevant indicators is population, account growth, wages, unemployment, building permits, uh, gas prices, and other economic indicators that we put into the software to come up with what our revenue may uh forecast would be.

And then we also, as I mentioned, we use specific factors applied for just Mesa itself.

On expenditure forecasting, we do the same.

However, we also take personal services as we as we know personal services has been a topic in the past couple of years and has been uh increasing.

Uh also other services and commodities, and I'll go into a little more detail on some of those of increases in those uh line items.

Um utility expenses have gone up, um, water commodity purchases have uh increased as we've talked about previously, uh, and also chemicals and tipping fees.

So, but also the capital, the major projects have increased uh over the past few years, and we're not seeing prices come down, it's just adding on to the inflation that we have.

So we're seeing and even vehicle purchases have increased.

The average uh new car increase um has been significant over the past couple of years, also.

So moving into the general governmental funds, just a reminder the general governmental funds include the general fund and also the uh quality of life fund and the quality of life fund primarily uh funds the police officers and firefighters back in I believe it was uh the early late 2000s, late 90, late 90s, early 2000s, the city passed a quality of life uh uh sales tax that was dedicated for 120 police officers and 65 firefighters, and that's what it primarily goes towards.

And so, with that, what I wanted to show here was um council adopted um a few few years ago uh the city's financial policies.

And what I wanted to do here is I know we've been presenting for the past couple of years the our financial principles and wanted to kind of correlate our policies to our principles.

And the way the the city looks at our policies is the policies is what um is kind of our floor, our base.

What are what is that what we're looking for?

And so with the state, we have to do an adopted balanced budget.

And adopted balanced budget is when your expenses match your resources.