Good evening and welcome to the first workshop for the proposed 2026 budget.

Tonight, our professional staff will focus on the preliminary capital improvement program.

As a reminder, no final actions are being taken at this meeting since it is a workshop.

Also, the rules of the city council still apply.

Speakers are asked to present their comments in a respectful and courteous manner.

Speakers should be on topic and be cognizant of their words.

Speakers are given three minutes to address the council and to help speakers stay within the three minute time frame.

We now have a much timer on the side dias to your right.

Timer buzzes when it hit zero, and we will work that speaker that the time is up.

Mr.

City Manager, any speakers.

Uh we have one speaker, Mayor.

Uh, my neighbor, Marilyn Schweitzer.

Um, can you help her with the microphone, please?

Thank you.

Something which one it's on right now.

Oh, okay, thank you.

Um, so anyway, Marilyn Schweitzer, and first, my thanks to staff and council for publicly airing the budget in a series of workshops as you do.

I think it makes it much easier and more clear for all parties concerned, and I appreciate the effort that goes into it.

I have four points which I hope you will make note of and address each topic as it comes up during the presentation.

First, undergrounding of overhead lines.

I appreciate the tier one and tier two approach.

I hope that tier one will be funded and that tier two would only proceed based on an analysis of specific areas and surveys of property owners in affected areas.

Kind of along the lines, Ted handle the new sidewalk program.

I would also appreciate an open data map of both tier one and tier two areas that would be kept up at least annually.

Second, the NCC Park along the river walk.

I assume this is the park at 430 South Washington, and I assume the 3.2 million is just the city's share.

So I'd like to know what the total cost is so I can understand why Share North Central is paying.

I believe North Central and the City have revised plans since the concept came up, and but I'm unsure of whether a mutually agreed plans have been settled.

Three, the Naperville train station.

I read that exterior restoration is being budgeted, which is great, but the interior could use some simple maintenance as well, such as painting and removing the outdated pace racks.

Perhaps some local artists could be or some local art could be displayed as part of a SECA grant after the simple interior cleanup is complete.

For the sidewalk cost share.

It's not clear to me how the cost share program can be reinstated since it was never revised or eliminated from the municipal code.

So I guess this means should staff continue along the path of eliminating it in 2026 and future budgets as implied by council's gift to the 2025 select residents.

Please do eliminate the cost share for standard safety maintenance, only keeping it perhaps if residents want something special like bridge at brick as the current ordinance accommodates.

Much is odd and not consistently applied in the existing ordinance, such as claiming residents owe a cost share on new sidewalks, while it has never actually been billed as the code states.

First, residents, not just the Jess in property owner, excuse me.

First and foremost, please recognize that safe soft sidewalks is a public safety matter for all residents, not just the adjacent current property owner.

Redists should feel comfortable to report hazardous sidewalks without feeling guilty that they are inflicting a cost upon the adjacent property owner.

So thank you very much, and good luck this evening and in future workshops.

Thank you.

And before I turn things over to City Manager Krieger to begin the presentation, just a reminder that there will be moments during the presentation for questions.

So at that particular point, when the slide comes up, that's the time to hit your cue buttons, and I will recognize you in the order you do so.

Mr.

Krieger.

All right.

Uh thanks, Mayor, and good evening, everyone.

This is the first of three budget workshops being held to discuss the proposed 2026 operating and capital budget.

These workshops are an important part of the annual process.

They inform the community on how the city will spend tax dollars and provide all of you with information necessary to make well-informed financial decisions.

Tonight, we'll start with an overview of the city's capital improvement program, more commonly referred to as the CIP.

We'll review this year's progress and discuss some of the major areas of investment planned for the next five years.

Mr.

Krieger, could you pull the microphone closer to your yes?

I can uh that's going to include an overview of some of the projects we have planned and details on how we fund those projects.

Each year, we come up with a theme for the annual budget that reflects our financial philosophy and approach to putting this document together.

In fact, those dollars fund the work behind our mission statement that says we will provide services that ensure high quality of life, sound fiscal management, and a dynamic business environment while creating an inclusive community that values diversity.

We often say that as government we are stewards of the taxpayers' dollars.

How we actually actually steward those dollars is the basis for building our budget.

We want every dollar to have a job, which means that every dollar is allocated to projects or services that are achievable with available resources and will be spent.

That includes financial resources as well as the appropriate number of city staff to carry out the work within the planned timeframe.

If we can't identify the proper resources, the project will be pushed out or removed from the CIP.

This keeps our focus on high priority projects that align with our mission and priorities, many of which take several years or decades to finish.

However, this also means that we don't have a significant financial buffer for an unplanned event or if costs are higher than expected.

Last year's budget was a good example of this.

We had several financial unknowns going into 2025.

These included the outcome of ongoing police and fire contract negotiations and how to replace an estimated $6 million in grocery tax revenue.

Because of these unknowns, new items in the budget were approved under the condition that a long-term funding source would be identified for them.

As some of the unknowns became knowns, we realized that higher expenses meant we had to divert dollars to offset budget increases for existing personnel and services.

The same philosophy applies to both operational and capital spending.

You'll see that many of the projects in next year's CIP are either dedicated to maintaining, upgrading, or repairing an asset that already exists.

This slide illustrates how our CIP has become more focused on upgrades and replacements over the past five years, and how that will continue to be a focus going forward.

Projects that fall into the upgrade and replacement category are usually new assets, large-scale replacements, or assets that have reached the end of their useful life, or assets that are being replaced due to external factors, such as changes to regulatory guidelines.

Water main replacements, the Springbrook treatment plant rehabilitation and expansion, and the North Aurora Road Underpass are all examples of projects that would be considered an upgrade or replacement.

While most of the city's current capital program or current capital program falls into this category, we classify another group of projects as maintenance.

Capital projects that fall into the maintenance category are identified as projects that extend the useful life of existing assets.

Examples here include the road, uh bridge, and parking deck maintenance programs.

The 2026 to 2030 CIP is roughly an 85-15 split.

About 85% of the five-year budget is allocated to upgrades and replacement projects, while the remaining 15% is allocated to maintenance-focused projects.

While this split has been relatively consistent over the last couple of years, history tells us that this hasn't always been the case.

In 2023, the city started to significantly shift away from maintenance-focused work and toward more full-scale upgrades and replacements.

Before then, maintenance projects made up 42% and 38% of the capital budget in 2021 and 2022 respectively.

However, in 2023, only 23% of the capital budget was allocated for maintenance.

As the city continues to age, new guidelines are established, or new developments come online, we will continue experiencing a shift towards upgrades and replacements.

The good news is over the last few years, we've improved on executing our capital plan.

This year, capital dollars spent and under contract are 7% higher compared to 2024.

This can be attributed mainly to projects in the electric and water utilities.

We anticipate spending approximately 125 million dollars this year, or about 70% of the CIP.

But we have put 80% of the work under contract.

One very long awaited capital project is kicking off after nearly two decades of planning and discussions.

I'm happy to announce that the North Road Road underpass reconstruction begins this week.

This project is funded 90% by outside resources, including federal, state, and local partnerships with Aurora and Naperville Township.

At the same time, water will release several bids in the next few months for ongoing Springbrook work and other capital improvements.

Looking at the numbers, it's clear that we are making great progress on projects that have been in the budget for many years.

At this time, Mr.

Mayor, we'd be happy to answer any questions.

Seeing none, Councilman Kelly.

Thank you, Mayor.

I have two questions.

One uh about that project on North Aurora that you just mentioned, wondering if we could get an update from yourself or from Ted just on when exactly that's gonna start when I saw the release that said at some point there will be a detour.

Um I think the release said we're in the final phase, which I think is technically true, but it's gonna be a long phase.

It will be done if you've got uh a little more detail on that.

Director Loudon.

Thank you.

Yeah, you're right.

Long, long final phase.

So you know, when we call it the final phase, it's because it's following the prior widening of North Road Road to the east.

So this will be the final bottleneck elimination at the railroad bridge.

So um work starting um right now and through the end of the year.

Um, it's just a lot of clearing.

They're gonna be getting ready to install a pump station that's needed for the underpass as well as starting to begin like the temporary bridge that they'll need while they reconstruct the railroad bridge.

Um, we will have a pretty lengthy, well, think about how long maybe okay.

Yeah, total total construction will be about two and a half years in the spring.

We will have a full detour while there is uh pipeline relocation as well as um part of the removal and reconstruction of the bridge.

So about two and a half years.

All right.

Thank you.

And then uh one one follow-up question on the previous slide uh that shows how much has already been spent, how much is under contract.

I'm wondering if you could give us a rough idea on uh where those funds are coming from, how much debt may be issued for 2025.

If you have a projection at this point, I'm sorry to put you on the spot on that, but do you know how much we'll plan on issuing for 25?

Director Munch.

So we already executed a 2025 bond issuance.

Uh test my memory here, that might have been in May that city council passed that ordinance and and we completed that issuance.

That was a 45 million dollar bond issue.

Uh, it was 20 million to the water utility, 10 million to electric, and 15 million in uh kind of general government capital projects.

So um all of the debt that we plan to issue for 2025 has already been issued, and we'll talk about some uh plans for 26 debt issuance later this evening.

Thank you.

Okay, go ahead.

All right, I'm I'm gonna turn things over to our finance director uh Ray Munch now.

Thank you, Doug.

So the proposed CIP for 2026 totals 190 million dollars.

Um again, I want to be clear that this number is preliminary and subject to change as we continue to work through the budget process.

The chart before you shows where investments are being proposed uh over the next five years, notably utility infrastructure projects in both water and electric account for nearly 63% of the total CIP.

Water makes up about 47% or more than 90 million dollars of the total CIP, primarily due to the upgrades that we've talked about at the Springbrook treatment plant.

All other capital assets make up uh about 37% of the CIP.

Transportation accounts for the largest share of that, uh included in the transportation investments are the North Aurora Road project that we've been talking about, and also some uh dollars down near the South 40 development, both for some uh continued land development as well as the transportation improvements that need to be made in that area.

Uh the first area that we're gonna focus on this evening is uh the electric utility.

We're gonna take an in-depth look at some of the things happening in that space.

Electric Capital Program is funded in two different ways.

The first is through the electric utility fund revenues.

That includes installation fees paid from developers for specific projects, grants, and most significantly the electric utility rates that customers pay.

The second funding mechanism is through debt issuance.

How much debt the utility can accommodate is reviewed as part of the rate study process that we complete every three years.

The most recent rate study planned for $17.5 million in debt from 2025 through 2027.

Since limited funding sources are available to support electric's capital investments, creating short and long-term capital plans is crucial.

This was no different in 2026.

Electric originally proposed a CIP of 44.5 million dollars.

However, several factors over the last few years have reduced the utility's fund balance, which has put the utility in a more challenging financial situation.

Some of these factors include fluctuating power costs, declining power sales, and supply and demand constraints that have impacted material costs.

Because of this volatility, staff determined that electric's full CIP request could not be supported in 2026.

Electric staff reviewed their plans and submitted a revised capital budget, totaling $29.7 million.

To reach this point, staff identified $14.8 million worth of projects that would be deferred into subsequent years.

To achieve the most critical work, $10 million of debt is planned for 2026, ultimately issuing $2.5 million more than the last rate study originally planned for.

This will require careful planning and prioritization in the coming years and is likely to be an important consideration in the next rate study in 2027.

We've mentioned that the CIP prioritizes assets nearing the end of their life and prior commitments that we've made.

This is consistent with Electric's 2026 plans, some of which are shown here.

$800,000 is included to replace transformers and switch gears identified through inspections as nearing end of useful life.

$1.4 million is included to start the process of updating the city's SCADA system as the current system will become obsolete in 2028.

While there's significant costs associated with this replacement, the city has been awarded a grant through the Department of Energy to cover approximately 50% of that cost.

And I'm going to make a note here that on the slides, we've put an icon next to any project that has an external funding source, be it uh state or federal grant or some other type of outside contribution.

So you will see that throughout the presentation.

That's the 2026 external funding that you see on the left there.

Finally, the utility will continue to invest high heavily in the cable replacement program with work in areas that you see on the screen here.

Another major area focused during capital planning is the utility substations.

This equipment plays a major role in reliably transmitting electricity throughout the city's electric grid.

While there are a number of projects that maintain, upgrade, or replace substation components, this slide highlights a number of significant investments that are planned for next year.

Relay improvements at the MODAF and Route 59 substations are estimated to cost 458,000.

Substation power transformers also need to be replaced as they are nearing the end of their useful life.

These devices have significant lead times of three to five years, requiring advanced planning and procurement.

1.2 million dollars is budgeted for next year to start this replacement process, with the understanding that additional costs could come down the road as these lead times fluctuate.

Emergency and replacement parts for substations ensure the utility continue to provide reliable power.

The plan is to spend 1.2 million dollars on these types of purchases.

1.3 million dollars and additional cable replacements at various substations is also included in the plan.

And finally, the tollway substation upgrade is a project that has been in the works for several years.

This substation is vital to our electric system because it is responsible for power along the entire IDA corridor as well as downtown Naperville.

However, long lead times for materials have created significant delays in this project.

We've been talking about it for several years now.

The 2026 budget includes $6.3 million for this work.

Staff does anticipate receiving most of the materials for this project and completing the construction in 2026.

Because of the focus on current assets, replacements, and previous commitments, some electric projects need to be deferred.

Most notably is the overhead to underground utility line conversion that we've been talking about for several budget cycles now.

Originally, the 2026 budget included 5.7 million dollars for this work.

However, given the utilities' financial constraints, the decision was made to reduce the undergrounding budget by 4.7 million dollars and shift work into future years.

One million dollars remain in the budget for undergrounding work in some critical areas next year.

However, shifting the majority of planned work allows the utility to prioritize the work that is already in process, like the tollway substation that we mentioned.

Once some of these larger projects are completed, the utility may have more capacity for additional undergrounding work.

However, it's important to note that the capital plan is evaluated yearly, and the amount of funding that can be dedicated to undergrounding will largely depend on the utility's financial position at that time.

To plan for the future years, it's important for staff to understand council's level of willingness to invest in this work.

For the purpose of this discussion, staff broke the project into two tiers.

Tier one focuses on the work that involves undergrounding lines along major roadways and those that feed major electrical equipment such as substations.

It is estimated that this work would cost $18 million between now and the end of the decade.

This tier of work would reduce outages for approximately 1,500 customers per of outage event, and that includes one of our large commercial customers, Naperville North High School.

Reducing the number of customers who experience an outage is certainly a benefit, along with the increased system reliability and improved aesthetics of underground lines.

However, there are also other issues to consider.

These include the need to reconfigure street lights and uncertainty around all interested parties agreeing to underground overhead poles.

It also does not reduce outages in neighborhoods with overhead lines, while storms and wildlife are a factor in potential power loss in those areas.

It's that second tier of work that would include burying lines and equipment in residential backyards.

This work is more complex and has a significantly higher price tag.

The estimated spending on this part of the project alone is $35 million between 2025 and 2035.

While tier two does make a positive impact overall, it would be less than tier one, as fewer than 50 customers per event would likely benefit from that work.

This event, this level of investment would help decrease outages caused by storms and wildlife, reduce tree trimming costs, and enhance the overall appearance of these areas.

However, since the work is more complex, several issues like the easement process, higher long-term maintenance costs, and longer troubleshooting times need to be considered.

So with all of that, it leads us to the question of what level of financial support should the undergrounding project receive.

So at this time, we would like to hear your feedback on this particular issue.

We've got several buttons pushed here.

Councilman White, we'll start with you.

I appreciate it.

So I just want to make sure I understand.

So 94% of our lines are grounded already.

So we're talking about another six percent, and we're looking at anywhere from 18 million or 35 million.

Uh I'm I'm actually really struggling with the uh bang for the buck.

Um maybe uh Brian, you may be able to comment on this.

I mean, given the amount of outages that we have.

I'm uh trying to figure out how we justify spending that much given the fact uh that our reliability ratings are very high as they are right now.

And if anyone wants to comment on just that part, and I'll have a follow-up question.

Director Growth.

Certainly.

Brian Growth Electric Utility Director.

I would say that the tier one work uh impacts a lot of customers.

As you can see, it's about 1,500 customers per event, right?

So this is what we would consider the mainline cable.

This is along major roadways, not necessarily disruptive in backyards and things like that.

There may be one or two, you know, areas where we have to jog down a street or whatnot, but um, this is really the bang for the buck, quite honestly.

If you if you want to use that terminology, um this is the best use of money.

It's uh it impacts large customers, it impacts residences.

Um the tier two work is difficult, it's very difficult.

Um, and we don't know to what level folks will grant us easements to be in the backyards.

Um, I do think one of the benefits is reduced tree trimming, reduced intrusiveness over time.

Uh, we we do work on a four-year tree trim cycle, so we're in backyards every four years, but nonetheless, I think tier one is the right way to go.

Okay.

Um thank you, Brian.

And a follow-up question, the we we say per event.

So an event someone loses power, were we looking at 20 minutes, 15, 20 minutes of outage for a particular customer?

So typically, if if we have a line, if we have a tree on a line, um, more than just uh a wildlife contact where we have a bird or a squirrel, but if we have a tree on a line, it typically takes us 12 hours to rebuild that line, maybe even longer if we have to reset a pole or sets of poles.

Um that's kind of the tier two.

So um if you look at that, about 50 residential customers could expect to be out for 12 hours, 16 hours while we reset a poll or two and we restring the overhead wire.

Um the tier one along a major roadway, we've had balloons get in those wires, we've had trees fall on those wires, and so you have a larger larger outage area um for a longer period of time.

Whereas if that was undergrounded, we probably wouldn't have that outage.

Okay, and how how many events would you say we have on an kind of annual basis?

Just give us some perspective.

Uh from a storm perspective, um, these longer outages, I would say we have two to three per year, and they typically align well with uh summer storms.

Two to three.

Okay, thank you.

Councilman Oldsar.

Thank you, Mayor.

So one thing I wanted to look at here was the timelines.

So I noticed that tier one is a funding request for five years, tier two is a funding request for 10 years.

Um one thing that I did not ask about in the last budget cycle, but I did afterwards is um the cost beyond that.

And correct me if I'm wrong on any of this, but my understanding is if the the 20-year cost of doing these programs is more like 120 million dollars, not 18 or 35.

Am I right about that?

Uh that sounds about right.

Um, this gets us to about 98 percent, I believe, underground.

Um, and then beyond that, it becomes a little bit harder to understand exactly where we'll be um and what the costs will be for that.

The utility has we have a 10-year capital plan, and that's what we usually project out to.

So, one of the concerns I have is that I I want to make sure we know what we're voting for, right?

If if we like hypothetically, if we were to vote for both tier one and two, so like 53 million dollars, um like I would be surprised then to get another you know, 70 million dollar request five years from now, which is sounding like what it would be to get all the work done.

So, a question would be let's say we were to vote for tier one, would be there be an expectation that there'd be more money coming in in 2030 to complete tier one.

No, our tier one is is fairly fixed.

The only thing that would impact the cost of tier one would be significant material increases um or labor increases.

Okay, I appreciate that.

I mean, I'm um the same concern councilman White had.

Um did I hear you right that it's probably two or three outages a year that are like tier one impacted?

Uh I would say tier one and tier two, the long outages, the 12 to 16 hour outages are two to three per year.

Okay, what about just in tier one?

Can you pin it down to that?

Tier one, tier one, I would say we have one to two a year.

Um, and we could typically switch around those, so it's a smaller scale, but nonetheless, if it's in a certain spot, we can't switch around that.

Okay, so when you say you can switch around, that means like you can use the computer system to route electricity from one absolutely.

Okay, um, so I'll just throw out I mean from your tier two, especially just being a lawyer and knowing how hard it will be to get easements in residential backyards.

I tier two would be like a definite no for me.

But um, even tier one, I really have to hear kind of the other comments on the dais, just just thinking about for one or two outages a year, 18 million.

Um, and that's like compared to the cost of some of the other projects that we're looking at.

Um, it's still a lot.

But um thank you.

I appreciate the clarity on that.

Thank you, Mayor.

Councilman McRoom.

Thank you, Mayor.

Uh question for Director Groff, and I'll go back to uh Director Munch.

Um, just a curiosity question.

Where where is the six percent that's not?

Are these the older, much older neighborhoods?

Or that's correct.

Downtown?

That's correct.

Okay.

So it's it we we didn't bury uh 96 per or 4%.

It at some point construction that we're just buried when yeah, we changed 1980s or something.

Yeah, we changed our standards to require all you know new development to be underground.

And I will say that there have been some people that have paid to underground primary and their services in the downtown area um for various reasons.

Okay.

Um I mean I think if money is an object, we're talking about the budget, but I think if money wasn't an object, I I think aesthetically, I think most people would say I I want lines to be buried in my my neighborhood, right?

Um I go to people's homes and they have I see them, I'm like, oh that kind of stinks, you know.

But um, but money is an object.

So I I guess Director Munch, are you when we vote for the budget in in December?

Um, I understand we're you're asking us to vote for a five-year plan.

Um, and you're you're looking for our our guidance on it tonight.

Um, but I guess I guess I'm gonna ask a dumb question.

Um, you know, we do our rate study.

That rate study um takes into account what our plan was to underground.

Okay, well, those costs came in a lot higher.

Um you asked the utility director to reduce this budget, and now we're looking at a budget where you stripped out four almost five million dollars out of uh undergrounding, right?

So I guess to me in an ideal world, I would underground every line in town.

But on any given year, I rely on you guys to tell us hey, if we do this, it's gonna put pressure on rates, we're not gonna be competitive anymore.

Um so I think I would probably lead toward the lean towards the guidance of here's what we hope we would like to be able to do on any given year, do what we're doing right now, and take out five million dollars or whatever it is on a on a year by year basis.

Director?

Thank you.

So you know, make a comment to one thing that you pointed out, and you you bring up an excellent point.

So for our newer council members, what we're looking at this this evening is a five year CIP.

It's the way we plan for capital projects because by their their inherent nature, they're just different than our operating budget.

They they take significant planning, engineering, design, and so when you start to talk about one of these projects, once you put something in motion, it takes a little bit longer to kind of make it come to fruition.

And so from a budgetary perspective, we look at capital over that longer time horizon because that's how we put a plan together.

But from a budgetary perspective, we absolutely approve dollars in the budget on a year-by-year basis.

And so there is some flexibility there.

Um talked about the rate study, that's a process that we go through every three years.

Um, one of the things that Director Growth and I have been talking about recently is the fact that the electric utility is just different.

Um, you know, all the workshops, all the discussions about power costs and the future of power, you see how many factors are at play in that industry.

You know, water by comparison is relatively simple.

There's water in a pipe coming from Lake Michigan.

We pay a fixed cost, it's very easy to project and manage that.

The electric utility is just different.

So as we work through the rate studies, some of these variables are changing a month, two months, six months after the rate study is completed, and we just have to be able to flow with that and make adjustments, which is what we're doing this year.

So we're looking at the financial resources, we're taking into consideration what are the priorities in terms of the work and what can be accomplished, and that's why we put together the plan that we we've put before you this evening.

Councilman Sayed.

Thank you, Matt.

So this is for Director Munch.

Uh tool farming complex uh underground off lines and equipment in residential backgrounds.

Do you expect any pushback from the community?

Because people are very sensitive about their own backyard, plantations, greenery, and all those things.

And how are we prepared to handle those things?

Director Munch.

I mean, I'll answer the question, but I think we'll we'll all share a resounding yes to that question.

Uh I I don't know that any of our residents would get excited about what that work will look like.

And Brian could tell you more specifically what it actually would look like to the resident.

I'll be pretty blunt.

Backyards will be destroyed, right?

No matter how much we try to do things cleanly, neatly and nicely, we will be directional boring and likely digging up most of those backyards.

Um there will be further if if folks want their services buried to their homes and not an overhead service like they have right now, there will be trench work that will go from the pole to each residential meter trough, which is the meter on the side of the home.

So backyards will be in rough condition for at least a summer in the areas that we are working.

Okay.

So do we uh plan to communicate to them in advance so that you know we take them in confidence, work with them, collaborate with them, and move forward?

Absolutely.

So if we were to move forward with tier two, we would handle it like we handle all of our planned maintenance work, which is door knockers, uh neighbor notify is used, planned outages are scheduled with the customers when we can, where we can.

Uh we typically provide five or seven days' notice when we can.

Um, obviously, weather and other emergencies play into that.

So, yes, we have a very robust communication plan that our communication folks help us with, but it will be a summer of a backyard torn up.

Yes.

Okay, so for two.

Follow up question on this.

How do we handle large businesses?

Like, you know, Costco, uh Walmart, and all those businesses.

Uh I would say those most of those businesses are already undergrounded from a service perspective.

Um, a lot of those businesses are new within the last 20 years, and and like I said earlier, our standard has been to underground those services anyways.

So it would riser down a pole and then be undergrounded to the customer.

So they would likely not see a large amount of um construction.

Okay, thank you so much.

Councilman White.

Yeah, thank you.

Uh, just a couple other questions there.

I'm sorry.

Um, so I just want to make sure if we have an outage, you basically I was and I've been over to the electric department.

You guys basically have switches which y'all can kind of redirect where it goes.

So when you say in one of those events, it may be 11 hours.

Is the customer out for 11 hours, or you've been able to make the switch to at least get them going until you get the other piece fixed.

Um so some customers would remain out for 11 hours.

So what we do is we reduce the scope of the outage either by switching on existing infrastructure, or we cut the line, we physically cut the line and install what they call bells, and that allows us to insulate and allow our line crews to work safely between grounds.

Um in large storms where we do have large tree limbs that fall on lines, there's no way for us to get a tree crew in, cut that out, get rid of all the trees, and then rebuild the line, whether it requires a pole or two.

Um, you can use a metric of about eight hours of crew time to replace each pole.

Okay.

Um, and here's the other one.

Let's say hypothetically, uh I get I we give you half of what you're asking for.

Are have you or can you prioritize the most critical areas that would need to be buried?

They are.

Yes, absolutely.

So in the tier one, as you saw, we had about a million dollars for next year in there.

Um that is our highest overhead incident line, and then we prioritize based on less and less and less and less outages.

Um, the one the line that goes past Naperville North High School along uh that road is is one of our most problematic circuits, and that's why it's included for next year to be to be undergrounded.

Okay, that it might help be helpful for the council to um maybe it's laid out it's harder for me to kind of understand it.

But whatever that priority is, what the cost would be for that.

So if we you know we may I'm not convinced that everything needs to be buried for the amount of money that's gonna cost to do it, but if it's a priority one that if that one goes out, you know, you know it's gonna we're gonna be in trouble, or it's or some of them are much more vulnerable to going out compared to something else, I think would be helpful.

I would I would to that point, I would say tier one is very high priority, large outages, um, a lot of incidents on the line, whether it be birds, trees, things like that.

So that's how we've kind of not only have we prioritized based on outages and impacted customers, but then we've also separated it out by level of effort, and that's how we came up with tier one and tier two, right?

So I would say that that's pretty much already done.

Tier one is the high priority work, tier two is the nice to have as I would classify it.

Okay, I gotcha.

Thank you.

Councilman Killing.

Thank you, Mayor.

Um, so I'll uh I've got a few thoughts and a couple of questions.

Uh one is that I just think at a high level, I do think it's an important project uh conceptually for the portions of town that don't have this and suffer more outages to to get up to speed with the rest of the city, 95, 96 percent, 90, you know, what 90, whatever percent it is that we determine you know, decades ago that that's the best uh course of action to have the rest of the city catch up is important uh and part of its aesthetics, part of it is um you know, a lot of people work from home, uh outages of even minutes, let alone hours can be very detrimental.

Some people have medical devices that rely on electricity, they may or may not have a generator.

Um, some of the larger customers, even more important, the high school in particular, if you have a school full of kids, like 2,000 kids at north, and the power goes out in the middle of the day, that's that's a major problem.

Um so I do I don't want to lose sight of the fact that I think, anyways, that it's an important project.

Um I think certainly there's a huge divide between tier one and tier two.

Uh in tier two, I'll say initially I was a supporter of.

I I full the schools we live in one of those neighborhoods with overhead lines.

I've talked to a lot of neighbors, dozens of neighbors over the last couple years where we've been talking about this project.

And there is a uh pretty serious divide.

I would say almost half and half, to be honest.

Half that are very excited about it, hate the outages.

The outages cause some serious problems and it drives them nuts.

And if we can bury these lines, they want to buried.

And half who say, if you want to cut through my yard, you know, over my dead body, it's never gonna happen.

Um so there is not a unanimous opinion one way or the other.

I think if we were to ever get there, and I'm not sensing this council right now is ready to sign off on that.

If we ever were to get there, I think something like what Marilyn's talking about, you know, localized surveys really going in on neighborhoods or even blocks and figuring out if is this something that this particular area wants to do or not would be worthwhile, especially considering the money.

Um I do have a question about the time frame on the slide you've got up right now.

The time frame for both starts in 2025, and I I think I know the answer, but I just want to be sure.

The million for 26, I heard you say is probably going to be focused on Ogden Avenue by the high school.

The 5.21 for 27, is that still exclusively within the tier one world, or is any of that bleeding into tier two where it says it starts in 2025, or is tier two not really starting until 2030 at all?

I believe there's a small amount of overlap, but I would say that the majority is for tier one.

Okay.

And I uh the way this conversation is going is I think the way we expected it to be a year ago, which is we'll look at this every year as things develop.

Um but my my other question, I just want to be sure that if the direction from this council at this time is let's do tier one and let's not do tier two.

Is there anything that we would not be doing between 25 and 30 that would prevent us from moving to tier two if a council in the future wanted to do that?

No, I don't think so.

We we would be able to spin up the program and expand the program as we see fit.

Okay.

As you see fit.

Okay.

So for myself, I'll say based on all that, I I would support tier one and I would probably say let's at this point in terms of just kind of future direction of staff, say hold off on tier two.

Councilwoman Gibson.

Thank you, Mayor.

I have a question for Director Groth.

Um, once the lines are buried, what's the lifespan or how often would there be incidents or say since these are long major roadways, if we're doing construction in that area, are we increasing our maintenance costs by burying them versus what it costs when there's an incident when they're overhead?

Uh typical cable life is 30 to 50 years.

Okay.

Um, you know, I we always call it the Christmas and the New Year's effect.

So we lose a switch gear or two on Christmas and New Year's due to vehicle versus uh switch gear, vehicle versus transformer.

So those will happen.

Um they happen vehicle versus pole as well.

So it's hard to say, you know, it's kind of that chicken in the egg conversation where you know, will something not happen.

I'm not not quite sure.

I will say that you know, we used this metric last year when we were talking about this, but I would say 50, and it's still fairly holds true today.

50% of our outages are on five percent of our system.

That's to say 50% of our outages are on the overhead portion of our system, whereas you know, the other 95% of the city has the other, you know, 50% of the so high concentration of outages in overhead areas.

Okay, so when um there are those outages though on the other 95% of the system, is it more expensive to fix them because they're buried?

It can be, depending on if the cable is direct buried or if it's in pipe.

So um portions of town are direct buried, and which means we have to physically dig up the cable and find where the fault is.

That takes us a lot of time.

As we talked about before, we can redirect power while we're trying to find that.

But if we have a fault and a fault, like we've had in certain areas of town recently, um, we can't switch around, you know, two faults that are here and here.

Um, so I will also say that it does take us generally longer to find an underground problem than it is an overhead, and that's really just hey, we can walk the line and see if there's a problem.

The you know, there's a squirrel or whatnot.

Um, underground, it makes us you know isolate and test and test and test and restore slowly.

So um those are the kind of the pros and cons.

Okay, but the frequency is less.

The frequency is less.

Okay.

Um especially with new infrastructure.

And would we be doing direct variator pipes for these in pipe?

Our new stand our standard that we've been doing for about 10, 15 years, is that you put a polypipe in the ground, you directional board that and that's kind of the the what I was talking about earlier, where you kind of destroy a backyard and you put this pipe underground in between equipment, and then if you have a problem in that cable, then you come back and you just pull the cable out and pull new cable in, as opposed to having to dig it up, find the problem, and then fix it and then fix it and fix it.

So if we get three faults on a section, we will put it in pipe.

Gotcha.

Okay, thanks.

Uh just for the record, uh support tier one, and I agree with Councilman Kelly on holding off on tier two.

Thank you.

Okay.

With regard to tier one and tier two, last year's request had at least two or three full-time equivalent employees that would be hired to do the undergrounding program.

Uh one of them, I believe, was a more higher price project engineer, and then maybe two or one or two support staff.

Uh are those factored into this request as far as the capital improvement program, or that's gonna see that's gonna come on the other presentation later on.

No, we've we've hired the one individual that was related to this project.

Um, and they are you know full time on this project.

We've been designing this work this year.

We've ordered the material, it's coming in half this year and half next year.

Okay.

Um with regard to the multiple outages we had gotten complaints over the last I would say eight weeks from different residences who were having multiple outages, different neighborhoods.

Is the cable replacement program on slide 10 for 3.8 million dollars or the underground cable replacement program on slide 11 for 1.3 million dollars?

Is that what would be resolving those types of uh underground cable faults that you've identified, or what that where are those repairs coming from for the existing outages we're having?

So we are in the process of testing all of the cable in those neighborhoods that's Hobson West primarily.

Um we have gone through about 80 percent of the mainline cable that's the high voltage cable that affects most of the customers.

We have not found any issues there.

Um the next we will be in neighborhoods testing cables along the way.

We are thermal scanning all of our splices.

We've had two splices go bad, we've had one section of cable go bad, and then we had uh an issue on our 34,000 volt system, which had a wider impact.

We had a cable fault there.

So I would say for those customers, I hear you.

I I I understand the pain that you've had in those six or seven outages over the past year.

Um, but we are working diligently, and you'll see our folks continue to be in the neighborhoods until we find more problems.

And if we don't find more problems, we'll continue to look for problems.

All right, but just to clarify the the repairs for those lines that are affected that would come out of the budget items in slide 10 and 11, correct?

That's correct.

Those those are cable replacement line items, yes.

Okay, understood.

And then last question with regard to the uh the tier one proposal.

Would this be consistent with best practices in other utility companies in the state, or is this above and beyond the competition?

I would say this is above and beyond the competition.

You know, most investor-owned utilities are overhead and serve their customers in overhead respect.

And this is not going to affect any of the comed poles that we see along 75th Street or anything else, right?

Uh so we will be removing uh not along 75th Street.

This next year we will be removing our lines from some comed poles.

There are poles in town where we are joint use with commed, so that means that Comed is either above us or below us.

And typical practices is that we top the pole or we cut the pole down once we're off of it, we cut it down as low as we can, and then we turn the pole over to that utility, whether it be ATT Comcast or whatnot, for them to deal with it, we turn over ownership of it as well.

Okay, thank you.

I don't see any other questions.

We can move forward.

Thank you.

Question Okay, I'm sorry, we we do need to take a little pulse on the question slide.

Yeah, what you would like to do.

Anything else related to the electric utility outside of the undergrounding conversation would be appropriate for questions here.

Councilman White.

Thank you.

Mayor uh question as we are exploring um you know the MDR uh of the battery, all the things we've we've been discussing for the last month few months uh in reference to IMEA.

Um does any of that those proposals and requests that the council is as um has made and that you've proposed as well.

Uh can any of that be considered um as we are doing things like substations and and so on.

I'm not sure if any of it would match up.

But is there is there an opportunity to maybe combine our some of those requests or try to bring that stuff in so we can maybe potentially save us uh some money on that?

Certainly.

Um I would say one of the largest topics that we're looking for is battery storage.

Um we have several substations that have the ability to build a battery project on site right now.

Um of the projects that we're working on is the Durms and SCADA upgrade, and that's the 50% funded by the Department of Energy.

The Derms program, we've talked a little bit about it before, but that'll allow us to effectively remote control uh battery storage in homes.

So there's a less a little bit less than a hundred um customers in Naperville that have Tesla power walls or similar battery storage in their homes.

Um that project will allow us to interface with thermostats, batteries, all of those distributed types of generation so that we could deploy them when we need them or when the grid has a peak consumption period.

So from a substation perspective, we're modernizing all of the controls inside of our substations to be to be better at understanding when a problem happens, um, collect data so we can see how our substations and transformers are performing, be more efficient.

Um so, yes, a lot of the work that we're doing is in that space and supports that work in the future.

Oh, great.

Okay, thank you.

All right.

Councilman Help.

Go ahead.

Um, this would be a question for Director, uh, actually, maybe Mr.

Krieger.

Um if we vote for the option A for uh the electric undergrounding this year, and let's say two or three years from now, we say, hey, the highest priority wires were actually achieved in the first couple years, we don't have to finish this project.

Is that still an option at that point, or are there um you know contracts that I don't know what the reasons would be, but are there reasons we couldn't do that?

We um uh we would be able to we we would be able to revisit this on an annual basis.

Okay.

Um we're you know, we're we do not have an intention to enter into kind of like a five-year contract with someone to do a whole bunch of it.

So um it would be something that uh if uh the decision changed, we would be able to uh react.

Got it.

So my ask would be when we get to this point next year, um, and that one million dollar project is done that we see you know what percentage of the outages were cut.

So for example, if if that one million dollar investment solve 50 percent of the problem, I don't know that I would spend the next 17 million, but I I'll vote for it tonight.

Thank you, Mayor.

All right, council.

Um we'd like to get a feel for where people are on phase one, phase two, or phase none.

So uh why don't we just do a show of hands giving some feedback to the professional staff on phase one support?

All right, and how about phase two support and phase none support?

Okay, I think you've got some clear direction.

Before we move on, Director Growth, just something to keep in mind, assuming we ever ever get to the MDR piece, and we have people um private businesses that want to opt in and buy uh gigapaks for their their businesses or uh uh whatever the case might be for that battery storage.

Do we have any funding mechanism to provide the appropriate utility grade metering and additional lines that they may or may not need to feed back into our grid so we could utilize that for peak shaving or anything else?

So I would say we analyze that on a case-by-case basis, especially for those large customers, right?

So for smaller residential customers, we have hosting capacity studies, which we do every other year, um, which are posted on our website and take a look at what our general ability is to handle solar batteries, things like that from a residential size perspective, but from a large, you know, like a gigapack or one of those.

Um, I would invite anyone that's interested to give me a call, email me.

Um we'd love to to get something started here and understand exactly what would like to be done at for that project.

Um, but I would say that most commercial grade services are probably sized to handle um a little bit more than what the load is, right?

We have design standards that we use.

So I would say, you know, depending on the size, the the facilities already may be there, or we may need to build them.

So I I think it's a kind of a case-by-case basis.

Mr.

Krieger.

Okay.

Mr.

Munch.

Switch gears a little bit, move on to the water utility.

So as we've uh mentioned, uh Water's capital plan makes up almost half of the overall CIP for next year, which is significant.

The utility has several multi-year projects underway.

The two main priorities that the utility is looking at is the multi-year reinvestment in the Springbrook treatment plant and the ongoing water main replacements.

Those are highlighted at the top of the slide here.

So you have to maintain buildings, repave roads in the plan, things like that.

Lead pipe replacement focuses on replacing the remaining lead service lines located in the older parts of the city.

As we all know, municipalities are required to do this, and the good news is that Naperville is on track to complete this work by 2027.

The utilities also focused on sanitary sewer improvements to help prevent groundwater and stormwater from causing sewer backups in homes.

And of course, there are other capital projects that may not be aligned with one of these priorities, but are equally as vital to maintaining the utility's day-to-day operations.

On this slide, we see sort of the full scope of water's capital spending over the past few years for this next budget year and beyond.

For 2026, water's total capital investments add up to a little over 92 million dollars.

As you can see, water's in the middle of several initiatives associated with the priorities we talked about on the last slide.

These projects and programs were in some cases approved by prior councils.

In particular, those followed in asset evaluation that was conducted by the water utility at the start of this decade.

Approximately one-third of this work is associated with the Springbrook treatment plant, and another one-third is going towards water main replacements.

Water's capital work obviously does not stop in 2026.

The treatment plant and water main work continues through 2030 at a combined uh total of 244 million dollars.

Uh that is again a very high dollar figure.

We've talked about the extensive upgrades at the Springbrook plant, and that is accounting for most of those dollars here.

Um we noted earlier that there are other major projects that contribute to the reliability of the utility that must be completed.

Uh, some of those examples are emergency standby wells and water meter replacements.

Those are just parts of our kind of annual uh maintenance of the system.

So let's take a look uh at what is arguably the largest capital project that this city has ever undertaken.

That's the rehab of the Springbrook treatment plant.

Uh this slide probably looks familiar to some of you, uh, but we think it has tremendous value for the community and for those council members who are new to some of this information.

Uh it does a very nice job of laying out both the timeline and the dollars that are associated with this important work at Springbrook.

Um our wastewater utility uh works on a permit issued by the Illinois Environmental Protection Protection Agency or IEPA.

Uh this permit must be renewed every five years, and during that process, the IEPA can set new standards and limits for the treatment plant's operations.

One new limit that has been mentioned many times over the last several years is the reduction in the amount of phosphorus that can be discharged from the plant into the river.

Uh this requires new infrastructure to meet these new regulations.

We're also addressing the fact that the plant has reached capacity.

Population growth has increased the demand on this facility, and capacity improvements must be made alongside the required treatment process improvements.

The final consideration here is the age of the plant.

Making significant process improvements and ignoring systems and equipment that are nearing the end of their useful life would be both irresponsible and extremely costly in the long run.

All these issues must be addressed with a comprehensive, well-coordinated capital plan.

The timeline of which again we see on the screen here.

And much of the plan spending that we start to see taking place is uh the actual construction of these projects over the next five years.

The other significant priority in the water utility is the replacing of aging water mains.

Like Springbrook, Water's asset evaluations highlighted the need for a long-term capital plan in this area.

The evaluation showed that at that time the city was more than 50 miles behind on water main replacements.

Replacement of aging water mains is critical to minimize breaks and service disruptions.

While replacement work is increased from one to three miles of pipe annually, it remains well behind industry recommendations.

The American Waterworks Association's standard replacement rate is one percent of your system annually.

So for our total system of 650 miles, that means that we should be replacing around six and a half miles of water main annually.

Over the next five years, we will be uh aiming to reach that milestone.

Um, and we are budgeting at six and a half miles of water main replacement each year, um, and that will reduce what is now a 37 mile backlog.

So we've uh certainly made progress, but there is still a lot of work to do.

In the 2030s, uh, it's likely that the rate of water mains reaching the end of life will increase rapidly with over 125 miles of water main reaching uh the end of its useful life.

During that time, it's likely that we'll need to uh increase our water main replacement from that six and a half miles that we're at currently uh to upwards of 10 miles per year to keep that backlog from growing.

Uh however, it's not likely that we can achieve that level of work until after the major projects at the Springbrook plant are completed.

Uh current water main work has been budgeted according to the theme of working within both financial and staff capacity.

So I believe we actually showed uh this chart last year, and the the question was asked well, can't we just do more right now?

Uh the simple answer is there's there's only so many resources, and we're prioritizing those resources.

So there will come a point in time uh where we will ramp this up, but um I believe that is after we've achieved most of the improvements at the Springbrook plant.

Uh here we're just outlining some of the other improvements uh in the water distribution system.

Uh at the top, you can see the actual areas that will receive uh water main improvements next year.

Uh these are projects in King's Terrace, Saybrook, and Maplebrook subdivisions, and along portions of Ogden Avenue.

Uh it is also likely that the Ogden and Washington area water main that is currently under construction uh could extend into early next year.

These projects alone account for 22 million dollars of the water CIP.

Additionally, we've highlighted some other projects here.

Uh we've mentioned the lead service line replacements.

I'd like to highlight some positive news around the $3.3 million worth of work associated with that project.

Um we've received the go-ahead to formally submit for a $3 million no interest IPA loan that uh will allow us to complete all of the lead service line replacements next year.

Uh we'll actually be bringing an agenda item to you at the next city council meeting to approve uh the parameters of that loan through the IEPA.

Thanks to this, Naperville will be one of the first communities in the state to be completely free of lead service lines.

The utility has also planned uh coating replacement for the North Elevated Tank that will prolong the life of the reservoir at a total of 2.5 million dollars.

Yes, that is a very expensive paint job.

Um, um, that's it for this slide.

Uh next area in the water utility uh is the sanitary collection and pumping projects that we'll undertake next year.

Uh first is the rehabilitation of the Springbrook Interceptor.

That's in the Dragon Lake area of the Springbrook Forest Preserve.

Uh, this is a $3.2 million project next year.

Uh that interceptor is a large sanitary sewer that collects wastewater from various parts of the city and then conveys it down to the Springbrook plant for processing.

Uh next is the East Highlands sewer main replacements at 2.8 million dollars.

This is replacement of existing sanitary sewers where they were uh previously rehabilitated through uh sewer liners, um, but that uh secondary improvement has now reached its uh useful lifespan.

So now it is full sewer replacements.

Finally, uh we have uh the rehabilitation of some deteriorated sanitary service laterals in the Longwood subdivision at $2 million.

Are there any questions specific to the water CIP projects?

Councilman Wilson.

Uh for the lead service replacements.

Do we have the resources to take that on?

I guess next year when or when it would get started, or would we have to seek outside uh personnel?

Director Bolinas.

Daryl Blendis, Water Utilities Director.

Uh, that work would be bit out uh using a contractor.

Um we've had a lot of luck over the last couple years using contractors for that work.

Um in Aprilville, we're doing it from the main to the meter, so we're doing full replacement.

And uh we have access agreements signed for majority of these properties, and uh we're confident that we'll get all of them signed up and ready to go by next year.

Thanks.

And then for the uh the phosphorus um reduction, I can't remember.

Were we able to get any grants for that or were we eligible to refresh people's we did not get any uh we did get one grant, right?

We got two grants for 450,000 total.

It's a small piece, but uh we'll take every nickel we can get.

Uh but we were not eligible for um maybe the SRF loans for that program.

So no other questions, let's keep moving on.

Real quick, since we're on topic, the picture on the slide here, that is actually a picture of a lead service line replacement project.

So those are the projects you've seen primarily in the historic district where it's a small cutout in the road as opposed to the large excavations you've seen in some of the water main projects.

All right, while there's uh some significant need for investment across the utilities, our transportation network uh infrastructure is another important area that we're prioritizing.

Uh these projects account for just over 20% of the CIP next year at 38.6 million dollars.

Uh this represents an increase of roughly 31% or 9.1 million dollars over uh the 2025 budget.

There's a number of factors associated with this increase.

Uh, this includes some of the rising costs, the aging infrastructure, and uh more of the projects moving from a design phase to a construction phase.

Um, one of the major reasons we see such a significant increase is the high value of carry-forward projects.

Carry forward projects are those that we have budgeted in one year and get pushed forward into the next year.

Um there's a number of reasons why projects get pushed from one year to the next.

Some of the more common reasons are delays in getting items under contract, estimates that come in higher than anticipated, uh, delayed materials um and even delays in permitting through state or other agencies.

Um there are a number of uh very high value projects being carried forward into 2026 from this year, most notably the North Rail Road underpass project at $13.5 million dollars, uh, some of the South 40 developments and traffic improvements at 2.1 million dollars, and there's also a county-led uh project uh for improvements along Naperville Road and Neighbor Boulevard at 1.2 million.

Uh some of these projects sound familiar because they are um North Roar Road.

I I think we've had about 12 million dollars in the budget every year since I've started working here and uh haven't haven't spent very much of it.

So next year we think is the year where we start to uh see some significant progress on these from a budgetary perspective.

Um those three projects alone that I just mentioned account for 16.8 million dollars in the budget next year, so uh significant portion of the the TED transportation budget.

Uh here we just look at some of the other uh major transportation related investments that we'll make next year.

Uh first project on this list is a new one for 2026 upgrades to the Washington Street Bridge over ID eight.

Uh I'm sure when you hear Washington Street Bridge in this year's budget workshop, it's not the most desirable phrase, uh, but I'll put your mind at ease.

Uh this is a different bridge through an intergovernmental agreement with the Illinois Tollway Authority.

Uh the city shares a portion of the maintenance costs associated with the Washington Street Bridge over Interstate 88 on the north side of town.

Uh the tollway completed an inspection of the bridge and identified a number of repairs that need to be made.

Those repairs uh will be included in the tollways upcoming bridge maintenance program, and they will seek a reimbursement for the shit city's share of that project.

Uh next few projects outlined in the slide um are pretty familiar to us.

Uh we continue to work on the improvements uh to 48th Avenue.

Um we're getting closer to construction for that project.

Um there is uh just under 2 million dollars in the budget for next year.

Those dollars are dedicated to uh land acquisition for some right-a-ways and uh continued project design.

2026 is an on-year for the city's municipal parking lot maintenance program.

Uh this is an every other year program that allows us to strategically maintain city parking lots.

Uh next year we'll do work in the uh some of the commuter lots, the police department parking lot, and the downtown Pawpaw lot.

Uh the next project is our annual street maintenance improvement program, uh field inspections to determine the exact locations of work next year is ongoing.

Uh, but we plan to invest 12 million dollars into this program in 2026.

That is your annual resurfacing, crack filling patching program.

Finally, the last project to note here, the big one, North Road Road underpass.

We've talked about it a couple times already this evening.

Uh it's been in the budget for many years.

Um it's taken a long time to get to this point.

Uh, construction is getting underway.

Um we anticipate spending about $13.5 million on the underpass project in 2026.

So while that project budget is significant, there are a lot of outside partners, including the City of Aurora and Naperville Township that are involved in that work.

Because of these partnerships, the city again will spend $13.5 million, so that's the number we include in the budget.

But the reality is most of that will be reimbursed to us from those outside entities.

So as a result, once the project is uh concluding, we anticipate uh being responsible for roughly $6.7 million of what is estimated to be a $52 million project.

So that means uh in the at the end of the day, the city has secured approximately 90% of project funding for that.

Uh next, we're gonna move on to the riverwalk.

We haven't talked about this much in recent years, uh, but there are a number of important investments coming to the forefront in this space.

Uh total capital investment of $15 million over the next five years as planned for this important community asset.

We've categorized these investments into maintenance upgrades and expansion projects.

Over the next five years, maintenance projects total two million dollars and include uh replacement of the irrigation system at Rotary Hill and improvements to the levy for Centennial Beach, which would be the earthen levee between the river and the beach.

Um for 2026, there's also $50,000 in our annual riverwalk rehab.

Upgrades over the next five years total $3.4 million.

These projects include the Grand Pavilion Plaza, the Netsley Overlook, and the replacement of the fire lane near the Carrollon.

Lastly, uh Riverwalk expansion projects total $9.6 million through 2030.

Most notably, the North Central College Park Development is budgeted in 2026 for $3.2 million.

That is the total construction cost for the NCC park.

This is in fact the vacant parcel on Washington Street next to the Burger King.

The work does have a 1.1 million dollar grant from the state of Illinois that we secured a number of years ago.

Because of these dollars, as well as some contractual obligations with North Central College, we've prioritized this project for completion in 2026.

We did reprogram the Riverwalk South Extension Project to 2027.

This was done primarily out of concern for staff's capacity to engage in so many large-scale projects.

While the major construction costs for the South Extension were pushed into 2027, it is possible that the project will go out to bid and be ready for groundbreaking in the second half of next year.

Ultimately, the projects in 2027 through 2030 are presented here for informational purposes, and we would be discussing them in greater detail at future city council meetings as they are included in the next year's budget.

Three capital projects planned in the commuter parking lots at a total of 1.3 million dollars.

The first project is this train station exterior renovation.

This project has a budget of $60,000 for repair work to the brick facade of the building.

This is needed due to deterioration caused by salt use during the winter.

Budget also includes $500,000 for train station platform walkway and stairwell restoration programs.

In 2026, the city also plans to replace the lighting on the Fifth Avenue platform and complete various sidewalk improvements.

The last project outlined on this slide is one we mentioned just a few minutes ago, the municipal parking lot maintenance program.

This work is planned for various commuter lots and is anticipated to total $737,000.

This includes resurfacing the Becker lot, crack filling and striping at the Burlington lot, patching, crack filling and striping at both the trailer and the park view lots.

The planned projects for 2026 are important capital investments.

However, they do create some uncertainty around the commuter parking fund as these projects are projected to nearly exhaust the fund's cash balance by the end of 2026.

Revenue levels, operating capital expenses, and discussions around the potential Fifth Avenue development will all influence the future of this fund.

Staff intends to include more information in the second workshop around the future of this fund and its ability to operate as a business enterprise in the future.

Next, we'll talk about the sidewalk replacement program.

Back in April of this year, the city council voted to suspend the cost share program cost share program for 2025.

As a result, staff needs some direction on the future of the sidewalk replacement cost share.

First, we'll start with some background information.

The sidewalk replacement program was implemented in 1960 when sidewalks were not as common in Naperville.

In fact, half of Naperville's homes did not have sidewalks at that time.

As time went on, the city wanted to increase the walkability of the community and designated a 6040 cost share program.

This was a way to create an equity equitable and affordable funding mechanism for sidewalk replacements.

In most instances, the city pays 60%, and a resident pays 40% to replace the sidewalk in front of a home.

Now 65 years after that program began, nearly 90% of residential properties in Naperville have a sidewalk.

So that brings us to the issue at hand.

Is the cost share program still the most effective and equitable way to replace sidewalks?

Based on the city council's direction to end the cost share program for one year, the 2026 CIP assumes no revenue from the cost share program.

So this slide summarizes the reasons why the cost share program may be at a point where it's outdated, ineffective, or simply an administrative burden.

With the 6040 split, the revenue generated from the program is less than 300,000 a year.

In fact, many sidewalk share bills go unpaid and eventually just become property liens.

Generational equity is another issue here.

On average, sidewalks last longer than property ownership itself.

So while a sidewalk may have a life of 20 years, the data shows that the average resident stays in their home for something like 12 years.

So you're paying for something that you know you may out or may outlive your your time at your residence.

In addition, uh Ted has developed some alternative sidewalk maintenance techniques.

Um sawing, which is commonly referred to as the trip hazard removal program, uh costs less than the full replacement of a sidewalk square and extends the life of the sidewalk in much the same way.

It's also less disruptive to the residents uh who live in front of that section of sidewalk.

On the revenue side, staff is uh confident that sufficient revenue sources exist to support this program.

Most notably is the home rule sales tax, which is a recurring capital revenue source that did not exist when the sidewalk cost share program was developed.

Finally, total staff time required to administer the cost share program is approximately 375 hours across three different departments.

Um there's also expenses for mailing uh the estimate that goes out to the homeowner, and then ultimately the invoice for the final costs.

Um as mentioned earlier, many of these invoices go out to residents uh and they're never paid, and so we wind up taking extra time to file liens against the property that sit there until either the property is sold or the lien ages out.

Ultimately, the issue here isn't so much about program cost as is about the time that staff dedicates to the program and more importantly, time that could be dedicated to other priorities.

Um, in conclusion, staff in both the transportation engineering and development and finance departments are comfortable recommending that the cost share program be discontinued permanently.

So, with that said, uh we reach another point where we're seeking some feedback from council specifically.

Should the cost share program for sidewalks be reinstated for 2026, or should we take an alternative approach?

Councilman Halzar.

Um thank you, Mayor.

I actually had a uh question about a slide before we started talking about this.

Would you like me to save that for later?

Or uh there'll be a question specific to the other riverwalk.

I assume okay.

I I think we'll go through this and then we'll go back to the question slide and then share other slides.

Councilman White.

Um, thank you, uh Mayor.

I guess my question would be is your ask to um do we get rid of it and then the city just picks it up total?

That okay.

Um I would support that.

Yeah.

Councilman Kelly.

Thank you, Mayor.

Uh I'll say I think I will support that as well.

It's really been an evolution like the whole time I've been on council six, seven years now.

And correct me if I'm wrong, but I think staff's recommendation previously was to do the exact opposite.

You are correct.

Okay.

And I was in the camp going the other side, but um to see staff come full circle, seemingly strongly recommending to go this route.

Um for and I totally understand the reasons uh and I'm with you on that.

So I think maybe it is time to go go that direction.

Thank you.

Councilman Sayad.

Thank you, man.

So can we go to slide 24?

Yeah.

So 248 Avenue upgrade two million, we say.

So what is the total budget?

And are we getting some funds from the federal government for this project?

Are we using the city budget for this?

Could could we just hold off on that question first, councilman, so we can uh get through the the question on the sidewalk replacement issue.

There'll be an opportunity here in a moment.

Any other questions on the sidewalk replacement issue?

Okay, is there a uh show of hands and interest to continue the sidewalk replacement program as is with the city picking up 100% of the cost?

No, continuing the city continuing the side sidewalk replacement program like we did last year.

Yeah, uh it was the city picking up 100% of the cost.

Okay.

Is there an ordinance change that's gonna be required for this as well?

Yeah, that's an excellent question, Mayor.

So um that was Maryland brought it up earlier.

So that was one of the challenges with the action that was taken last year, is uh the city code still stipulates the 6040 cost share.

Uh Director Louden uh, I believe is already in the process of scouring all the changes that need to be made, so that would come to you as a separate action.

Yeah, so you understood what the vote was or the what the raise of hands was here to continue the program as we changed it earlier in the year.

We we replace sidewalks, we don't send out any bills.

Correct.

Okay.

Mayor Councilman White.

So should we just change the name of it because it's no longer going to be a call share?

We're voting to continue it the call share as it was, so uh in essence we don't have a call share.

So we just want to just that may require ordinance, you're right.

Yep.

Okay.

All right, thanks.

I know we have questions on these other slides, so do you want to hold now for some questions before we get too far down the road?

Yeah, why don't we break for other questions right now?

Okay, let's start with Councilman Halzar.

Thank you, Mayor.

Uh Mr.

Krieger, I was wondering if you could um explain Edward Hospital's um pledge for the extension of the river walk and kind of staff's thought process on making sure we don't lose um that money.

Uh thank you, thank you for the question.

Um Edward Hospital um uh made a significant contribution for the South Extension.

Um it uh I spoke with Colin Delow I think last Friday uh on it.

Um he would like that re um restruck uh to be uh a contribution from endeavor.

Uh contribution still coming.

Um and my understanding is that the foundation uh intends um uh to get that uh I guess kind of somewhat ratified uh or papered up that contribution.

Um want to go into a little bit of the uh and and Ray touched on it briefly, but uh a little bit about the plan for the 2026 extension that uh director loudo has been um working on for 2026.

So um as was already mentioned, um, while the bulk of the funding has been pushed 2027, we did um so city engineer Andy Hines and I took a look at um what could be um potentially started in 2026 to have a groundbreaking.

So we do we are comfortable with that from a project readiness standpoint, we can bid the project in 2026 and um start with some um clearing, tree removals, things like that.

So really start the project in earnest with the bulk of the work, um, then beginning again in the spring of the following year.

Thank you, and I appreciate staff's um work on this.

Um it both solves the budgetary problem of um getting it in the right year, um, but also from the perspective of our donor.

Um making sure they see a shovel ground in the ground in 26.

I know it's important for for them, so it just saves the city some money, and it was a lot of hard work on all your parts to get it done.

So thank you very much, Mayor.

Councilman Sayed, this would be an opportunity for your 248th question.

So 248th uh improvements are a significant uh roadway capacity project's been in design for a number of years now um that uh my understanding is that is approximately 15 million dollars in total um project construction there is significant external funding uh I believe we have uh surface transportation funds and also a grant from the DuPage mayors and managers conference um I believe looking at the project page that approximately half of that project uh has outside outside funding sources timeline I would refer to Ted so the um the funds that are budgeted for next year are uh for land acquisition um and then we would be doing um construction in 2027 and into 2028 so most of the work in 2027 okay thank you so much councilman Wilson thank you uh I guess on that same slide councilman side was referring to there's the uh it's 24 but the street maintenance improvement program um I mean most no my and I guess residents complaints about the some of the resurfacing or microsurfacing work had been done uh I guess I'm wondering if there's um like a a plan to do it so it causes less an eruption like not around uh the start of school um and kind of just general oversight just hearing from other residents had complained that it's like was bumpier after microservicing was was completed and I I realize that there are less uh people bidding on this on these projects from um speaking to former director Novak uh about those um so I mean microservicing um you know is a is a great interim option to extend the life of the pavement um I mean we certainly did get some concerns um particularly regarding the timing um along Aurora Avenue with the start of the school year so we typically um do work with our contractors to um have work around the schools completed um during the summer in advance of the start of the school year um sometimes the window is is tight for us there were some um utility relocations occurring along Aurora Avenue and NYCOR had some work in the area so that um impacted our schedule a bit this year um but in general we do work um with the contractors to try to make sure that we're impacting um the schools as little as possible sure sure that makes sense the the last one I recall was when uh West was West Street was done and then going from South Naperville to deal and mill or whatever then there was another project done up there so at the same time it was just uh frustrating for myself I'm sure other people while driving around town uh the other question I had was uh the river walk plan with the upgrades for the Grand Pavilion Plaza and Nestle Overlook I was wondering if somebody could give a expand upon that just seems like a lot of money for a pavilion um so a lot of these um enhancement projects um were included in the 2031 plan um which is somewhat intended to be um kind of a fundraising tool so it is the foundation's goal to raise outside funding for as many of these projects um as possible so while we do have the placeholders in the capital plan it would be um city staff's intention to continue to work with the foundations to you know obtain that money um you know I think generally at least 50% was the goal um informally no there's no formal structure around that yet but that is kind of the setup that that we're going for on those projects um are you are you asking specifically what are the scopes of each of those uh so I guess with that the the has had there been is this 50 percent was it budgeted for 6.8 for example for for these two or is the expectation that we'll get 1.7 for before them I guess is my question.

Um so the uh Netsley overlook um has a construction uh estimate of 400 000 um with design for 7500 um the grand pavilion right now has a construction um actually it just has design in the budget um I think you may have seen there is a survey out right now the park district and uh the Riverwalk Commission and the city are interested in getting feedback as to what that should look like so I think that one is really going to be subject to change once the the survey results come back on that.

Um, I think you may have seen there is a survey out right now, the park district and uh the River Rock Commission and the city are interested in getting feedback as to what that should look like.

So I think that one is really gonna be subject to change once the survey results come back on that.

Um I mean, generally speaking, the um structure of the riverwalk agreement um does state that the city and the park board um and the riverwalk commission all have to take action to approve projects really before they get into two uh into detailed design.

So there is more conversation to come on these particular projects.

Thank you.

Councilwoman Giveson.

Uh thank you, Mayor.

Um, somewhat along the lines of Councilman Wilson's questions, the North Central Um College Park.

Um Director Munch, you mentioned 1.1 million from the state.

So that's an addition, so it's really like a $4.3 million project.

And our our part we're on the hook for is the $3.2 million.

No, so generally speaking, um, in these presentations, the dollars that we are portraying to you on these slides are the project costs.

And so if if we indicate that a project costs three million dollars and we're getting 1.1 in grant funding, that 1.1 is offsetting our costs.

It's so it's not adding to the project cost.

Okay, thanks.

And then is there also a cost share with the college for that?

I am not aware of any cost share from North Central.

I know that uh uh North Central Um, their portion, they uh they're providing the land.

They're actually the landowner of 430 South Washington now.

So are they giving us the land or we're building a park on their land?

Um the I believe that they would retain ownership after the river walk um park is completed.

Tristan Councilman McGroom.

Thank you, Mayor.

Um that is interesting that they would continue to own the land, but well.

Um it's a good question there.

I just a general high level question on Riverwalk, and I it's been years since I was on that board, and I'm not following it closely.

I just you know, if you I'm assuming you're confident in this these projections and that we can do this, uh, otherwise you wouldn't show it to us.

Just that the things that I hear uh there's private money that's being uh raised.

Um I think there might be some concern out there, and I I just want some reassurance because especially this expansion, and this is kind of like the undergrounding, like any given year, like hey, economy could go belly up, and we might not be able to do this.

Um, and we've and we have private dollars that are committed to it.

Could we be in a situation where the trail just has to stop or the expansion has to stop, and we're in a situation where you know, there's I think there's an expectation out there that the city is just gonna be able to come up with whatever money needs to be come up with to complete this project.

Is that just kind of what we're hoping and everyone's hoping can happen?

Well, that uh that's certainly not what we're hoping is gonna happen.

I can uh I can tell you that.

Um yeah, we've had uh discussions with Riverwalk Foundation um and their plans uh to raise money for this.

Um, but beyond that, um, yeah, it's it's it's our expectation that they would raise money.

Okay, no further questions.

Let's keep moving on from the last slide, which is the cost year.

Perfect.

Okay, uh at this point I am going to turn things over to our deputy finance director, Tracy Morocco to take us to the finish.

Thank you, Ray.

Catch up here.

Oh, geez, sorry.

I'm skipping right through my section, sorry.

All right, thank you.

Uh next we will walk through some of the facility improvements plan for 2026.

The proposed capital budget includes nearly nine million dollars for municipal facility improvements.

Most of the improvements in this category are multi-year projects that have been in the works for several budget cycles.

However, we do have one new project, which is for fuel system repairs.

Public Works maintains three fuel sites around the city to supply our fleet with fuel.

The fuel site at the Public Works Service Center was built in 2008 and requires several repairs to maintain regulatory compliance.

Work plan includes the replacement of the overspill manholes and various types of risers.

All of this anticipated work costs about 165,000.

The next two projects outlined on this slide are related to our public safety buildings.

The first is the continuation of the long-term renovation plans at the police department.

The $1 million in budgeted work includes upgrades to the evidence and crime scene areas, the executive conference room, and office areas.

The last project of note is the station four training facilities renovation, which will cost an estimated $2.7 million.

The fire department has secured a grant of $475,000 to help offset some of this cost.

Additionally, the fire station living quarter upgrades that were originally planned for 2026 were deferred to 27 to ensure funding would be available to complete the station four renovation.

The goal of station four's renovation is to ensure appropriate resources are in place to meet modern needs while safely and efficiently training the next generation of firefighters.

To accomplish to accomplish this, the fire department plans to renovate the basement of station four to include locker rooms, bathrooms, and shower facilities.

An extension of the back of station four is also planned to create space for a larger classroom.

Moving on to technology, capital improvements total $8.1 million in 2026.

Two major projects that go hand in hand are the door access system and security camera upgrades.

The door access system has a budget of 450,000 next year with an anticipated total expenditure between 2026 and 2028 of 1.6 million dollars.

This project will ultimately provide an upgraded solution to managing secure access to various city buildings.

The upgraded door access system will be integrated into the new security camera system.

Security camera upgrades have a budget of 1.4 million dollars next year, with an anticipated total cost of $4.9 million over the next three years.

The budget includes funding to replace cameras, software, and fiber connectivity.

Another major initiative planned is the upgrade to IT's data center, which has a budget of $900,000.

The goal of this project is to update basic infrastructure that makes up the city's two major data centers located at the municipal center.

And that wraps up the priorities for 2026 on the slide, but you may be wondering why the total budget is around $8 million.

2026 also includes $3 million for expenses related to the public safety mobile radio network.

Although most of these expenses associated with the radio upgrades were realized in 2025, a portion of the work is likely to carry into 2026.

While carrying these dollars forward does not increase the overall project budget, but it does extend the time frame of when some of the costs may be realized.

We're having a little hard time.

Thank you.

All right.

While the carrying these dollars forward does not increase the overall project budget, it does extend the time frame of when some of the costs may be realized.

This is largely due to delays in final system testing since the tests cannot be conducted once the trees have dropped their leaves.

And the next area we'll discuss tonight is our vehicle replacement program.

The total cost of vehicle replacements for next year is $8.1 million, which is about $1 million less than the prior year.

Replacement schedules are used to keep the budget flat and avoid major spikes from year to year.

Displayed is a breakdown of vehicle replacements by department.

Across all city departments, 61 vehicles are planned for replacement next year.

It's important to note that certain vehicles have years of lead time in order to secure delivery for a particular year.

For example, the fire department's ambulance and fire engine were ordered in 2024, totaling 1.5 million of the 1.8 million in fire vehicle replacements for next year.

Before we move on, are there any questions on this section?

Seeing no questions.

Next, we'll walk through some of the major revenue sources that support Neighborville's capital investment.

On this slide, we have home rule sales tax.

This is the largest single revenue source dedicated to funding capital improvements.

It was implemented in 2016 as a conscious decision to create a funding source to support ongoing capital investment.

The current tax rate of three quarters of 1% remains the lowest home rule sales tax rate of surrounding communities.

Additionally, the home rule sales tax allows the city to responsibly manage debt by providing a consistent funding source to support many general government capital projects.

You will notice that home rules sales tax revenue is projected to increase significantly in 2025.

There are two main reasons for this.

The first is the end of the Costco sales tax rebate program in 2024.

To give a little history, when the Costco on Ogden was developed and opened, the city and Costco agreed to rebate a portion of sales tax and home rule sales tax back to Costco to help offset some of the costs associated with opening a new location.

This agreement came to an end midway through 2024 when the city reached the rebate limit.

As a result, the city is now maintaining the full amount of the home rule sales tax generated by the Ogden Costco.

The second and most significant reason for the increase in home rule sales tax is a change in state statute statute.

Starting last January, the state now requires home rule sales tax to be applied to out-of-state shipments purchased online rather than state use tax.

Put another way if a resident buys an item online that is being shipped from another state and delivered to Neighborville, that purchase is now subject to home rule sales tax rather than state use tax.

This change results in increased home rule sales tax revenue and a decline in use tax.

As a result, the 2025 home rule sales tax projection totals 23.8 million, which is 18% higher than 2024 actuals.

The 2026 budget estimate is 2.4 million dollars, representing a 1.5 increase from the 2025 estimate.

And next we have motor fuel tax.

Motor fuel and local gas taxes are used to fund the city's street maintenance program.

The motor fuel tax or MFT is made up of other state, is made up of the state MFT and the Transportation Renewal Fund, or TRF.

For 2026, MFT is forecasted at $7.2 million and local gas tax at $2.4 million.

Stability in state MFT results from inflationary increases in the TRF being balanced by a forecasted ongoing reduction in fuel use.

Neighborville's local gas tax is a flat four cents per gallon tax.

Revenues here have been consistent for the past three years at around $2.4 million, but have yet to return to pre-pandemic levels of $2.7 million.

Motor fuel tax revenues will continue to be closely monitored due to the expectation that fuel use will continue declining.

All right.

And other way capital is funded is through the issuance of bonds.

Neighborville is considered a low debt burden community by our bond rating agencies.

Help maintain this low debt burden.

In addition, debt is carefully planned and issued on a reimbursement basis to avoid unnecessary borrowing.

The result is our prestigious triple A bond rating for 30 years.

The 2026 CIP assumes a planned debt issuance for $58 million in new utility debt.

This includes $10 million for the electric utility and $48 million for the water utility.

And I do want to I also want to point out the $48 million for the water utility includes a $3 million loan from the IEPA for the lead service line replacements.

As a result of this, the debt in the utilities that utilities would be taking on has no impact on the property tax levy since they're separate from the general fund.

The 2026 budget includes no new bond issuance for capital outside of the utilities.

And with that, I will turn it over to Doug for closing remarks.

All right, thanks, Tracy.

So what do we have next?

Because uh Illinois Bell no longer provides uh phone books, uh, we will be providing you our budget book.

Um my guess would be about 460 pages of fun, and um, we will have copies for you available uh a week from this Friday.

Um then our second workshop, which really focuses on the operating budget as well as outside entities through the city funds uh taking place on October 28th.

Uh and then um on an as-needed basis, we have a third workshop scheduled for November 10th.

Um, budget approval and property tax uh levy approval will follow our normal I guess our normal schedule uh which would be include uh or be appear on uh both meetings in December of this year.

And with that, Mayor, if there are any additional questions, we are ready at this time.

Councilman McRoom.

Thank you, Mayor.

Great job, everybody.

Great presentation.

I wanted to go back to the river walk real quick.

Director Krieger, can you just clarify?

So it's $15 million capital project.

And the anticipation is it's all privately funded.

No, the uh there has not been an established uh kind of percent split for the future projects.

Um we uh uh we here on the city side would like to get as much as possible.

Okay.

Um as much as possible from a dollar standpoint and uh as much as we can handle from kind of like a resource standpoint, uh but there is no kind of like set or established or agreed upon um funding percentage or split at this time.

Okay.

So like if five million was raised, we're on the hook for 10.

Is that like a scenario that could happen?

Or uh it is a scenario that could happen.

Okay, just make clear.

So uh that just kind of leads me into this bigger question about uh CIP budget, and it can be confusing.

It's different than the general fund.

I general fund we know what we have to pay for, we kind of know what's coming in, and a lot of moving targets and CIP and um uh you know, um, like when I look at the the funding, uh 10 million ish in motor fuels tax, um 24 million in home rule, and then we've authorized 58 million dollars in utility debt.

Uh that leaves a hundred million left uh for the 190 million dollar uh budget that's not really 190, it's like 130, right?

Like or 125 is what we're planning on paying, right?

Or spending so the the funding that we're seeing in in the presentation is around 90 million, and and so I assume the spread and the other revenue would be utility fees that were not being shown, right?

So maybe just like uh layman's terms, you know, for to get it out in the public.

Like, hey, here's how we fund, and a lot of this stuff is you know, we could punt to the next year if things don't work out, a lot of moving targets, and um you know what are we really budgeting for?

Is it 125 or 130?

Because people do see a 650 million dollar budget, and they don't realize a lot of that isn't spent, right?

And a lot of it's in here that isn't spent.

So if you could just educate us a little bit.

I'll take that one.

So that's a great question because there is a distinct difference between the operating budget and the capital budget.

And so if we start on the operating side, we typically bring in dollars, and those dollars, you know, part of the theme for this year is every dollar has a purpose, right?

So in the general fund, every dollar comes in, and we have a really good idea of where it's going by the end of the year because most of it is personnel costs.

So you know, those are very predictable and repeatable expenses.

When you get into capital, think about some of the things we've discussed tonight.

Some of these projects that we've been talking about for a decade or two decades, and how many dollars have appeared in the budget because we thought we were at a point where we're moving forward, and then unbeknownst to us, there's a pipeline that needs to get moved.

So those things you can't plan for them as reliably as you can your operating budget.

So for those reasons, we highlighted some of the revenue sources that we think are key to sort of the long-term sustainability of our capital plans.

Um, you know, the the one I'll point to, the home rule sales tax has really changed everything for Naperville when it comes to being able to fund the capital investments that our community needs without impacting the property tax levy through debt.

There was that goal through the financial principles to reduce debt by 25% over eight years.

We blew so far past that.

I don't even know what the number is at this point.

It's probably close to 50%, and that's really all because of the home rule sales tax.

We have that reliable funding source.

So every year some of those projects get deferred, delayed, some of that home rule sales tax uh is generated and it's not spent.

So, what does that mean?

Um capital projects fund for next year.

We have $55 million in expenses and only 42 million dollars in revenues.

So $13 million of the capital spend next year just in the capital projects fund is fund balance, home rule sales taxes generated last year, the year before that that weren't spent.

So in capital, you know, sometimes dollars aren't in a silo of one year at a time.

You get care we talk about carryover, use of reserves.

That is much more common in capital projects just because they're unpredictable nature.

So you plan over a longer time horizon, but that also means it's more common to use fund balance, debt issuance, some of those alternative funding sources that we don't see when we talk about the operating budget.

Thanks.

That's what I was gonna say.

I assume there's fund balances, and sometimes you make up for it through the fund balance, the 58 million and debt issuance.

You you plan to do that, or you may not, or you have that option to not completely uh issue all that debt and go to fund balances.

Correct.

And in the utility space in particular, uh we've talked about this several times, and I'll highlight it again for some of our newer council members.

Um in a lot of communities, you'll do a 20 million dollar bond issuance because you plan to build a building, so you issue that debt and then you start to draw down from that bond issuance to pay for your construction costs.

We're fortunate in that we plan and we have cash reserves, so we kind of do that in reverse.

We bond on a reimbursement basis.

So we let the work start to happen, and as we see that work coming to fruition, we have a really good idea of how much money is gonna move out the door.

So then we issue the bonds and reimburse ourselves for those past costs, which is uh completely allowable under all the IRS rules.

We'll pass a resolution in January every year that allows us to reimburse those costs.

Um so we operate that way to ensure that we're not borrowing more than we really need to.

Thank you.

Councilman White.

Thank you, Mayor.

Um, and with that question, and when you're saying fund balances, are you are you talking about our reserves?

I just want to make sure we're common.

Yes, but I'll be very specific.

The the reserves that we're talking about here are not your general fund reserves.

Okay, your general fund reserve that we we put so much attention around and trying to build up that reserve, those are very specific reserves.

We typically do not touch those for capital projects.

If that reserve reached a level where we thought there was excess dollars, capital would be an appropriate place.

But the reserves we're talking about here are reserves that exist in our capital project type funds, and they're there specifically for that purpose to be spent.

And if we tip tip into that, well, does that negatively affect our triple A bond rating if we go into the reserve?

No, it does not.

Okay.

All right.

Um other questions.

Um you said 61 vehicle replacements.

Is that the norm?

It seems a little high.

Uh on a on a dollars perspective, it's it's pretty normal.

I would say that the number might be a little bit higher.

There's a lot of small vehicles in there this year, uh, was my observation.

Um, you know, you have your big million dollar fire engines and ambulances and things like that.

Uh, but some years we see uh fluctuation in the number of vehicles.

So you have a lot of smaller SUVs and pickup trucks, sedans, things like that.

I think you see a little bit of that in 2026.

Okay.

Um thank you.

Um Costco.

Um I was glad to see that happening.

Uh that we're any pushback from Costco now that they're having to kind of pay like everyone else's within the no.

So uh, you know, it's typical we generate those economic incentives uh in in very uh specific circumstances uh for very high profile projects.

The Costco had an incentive.

It was clear it was a five million dollar incentive, it was paid off very rapidly.

Uh so all parties have met their their agreed upon terms and no complaints from anybody.

Excellent, excellent.

And uh last question, uh the MFT, uh it's going down every year, and I think I think we would agree that maybe the primary contributors the fact that to so many electric vehicles on the road.

Um I think you use was it seven percent?

Have we ever given any thought to uh the fact that the electric vehicles aren't paying for the road service?

Although I've had this conversation before that we the state raises up the uh registration fees on an annual basis, uh, and we really don't get any of that back.

So I one if we could answer that question.

And the other one would be if we recognize the fact that uh it's primarily due to the electric vehicles.

Is there any way where we can have uh electric reimburse uh something back to uh it's part of this CIP so that it kind of balances it out on those two different funds where they're coming from, but is I don't know if anyone's even looked into that.

Yeah, so so the issue that you're talking about is actually one of our legislative priorities.

Um, this is one that sort of starts at the state level because you know the motor fuel tax dollars themselves are a state tax.

We we model that state tax at a local level with our local gas tax.

Um, but really um, you know, the state has been looking at at what that will look like in the future because I I think it's undeniable.

Motor fuel sales tax is going to go away at some point, or at least be diminished significantly.

Um how it gets replaced, I think that's sort of the million dollar question.

I don't think anybody has a really good answer.

One of the advantages of the motor fuel sales tax is it's easy to administer.

Some of the other options, like you hear people talk about things like mileage taxes or things like that, those are much more difficult to administer.

And so I I think that's the challenge.

Um, but it's sort of being looked at carefully by uh a lot of different people, and we're sort of waiting to see which direction the state goes to see if there is um sort of a mirror approach that can happen at the local level.

Yeah, any discussion uh about the maybe having funding from electric go over to help improve this kind of make it balance itself uh in that regard.

I don't even know if we can legally do that.

Yeah, we've had some some very preliminary discussions about that.

Um I I don't know that technically we we understand exactly how that could happen.

Um I think we have some sense of where electric vehicles are charging in the city, but in terms of the mechanism to recoup um some tax or fee um that would be the equivalent of a motor fuel tax.

Uh I don't think we've quite gotten there yet.

Okay.

All right, thanks.

Councilman Sayin.

Yeah, thanks, Matt.

Regarding the 61 vehicles.

So, what is the cost of this vehicles?

61.

And uh what exactly we are going to do this, whether we are going to resale that or auction that or gift to somebody, uh what exactly is the process.

Yeah, so we have uh a very well planned, very robust vehicle replacement program.

So those 61 vehicles come in a cost of 8.1 million dollars.

Uh, but again, when you when you look at all the vehicles that are included in that, some of those are you know, fire engines at a million dollars in and of themselves.

So um once once we procure new vehicles, our fleet manager goes through the process to evaluate what's the best use for that vehicle that's being retired out of the fleet.

Sometimes we trade them in uh to lower the cost of the new purchase.

Uh we use auction services.

Um, in in some instances, uh it's nothing more than salvage value.

I mean, sometimes we're replacing you know, police cars that have been wrecked in an accident or something like that.

So um we evaluate the the best sort of return on investment for um getting rid of the old vehicle as part of that process.

Okay, thank you so much.

Yeah.

Okay, I think that does it for tonight.

Our uh discussion has been robust.

We appreciate you, counsel and uh professional staff for everything you've done.

Director Munch, you've got some new faces over on the side dice.

Just want to explain who those guys are and how they help you.

I would love to do that.

So uh, you know, the annual budget process, uh, you know, many hands make light work, and so uh our budget team, uh, this is this is the first year that I am not taking much credit for the budget.

So Tracy is leading the budget team this year and her role on the side dice.

Uh Nick Kruger, uh, he's the senior of our two budget analysts, he's been with the city for three years.

Uh, he primarily supports TED Public Works, the electric utility, uh, and then uh Braden Smith um is uh recent college graduate and joined our team this summer, and so he's uh getting a uh very quick education on all things City and April budget this year.

So they do great work for us.

Great.

Welcome aboard.

Thank you.

Great presentation.

Good night.