Good evening, citizens of Portsmouth, or who are watching us online.

Want to thank you for joining us at this special meeting today to go over our proposed budget.

I want to also acknowledge our city staff and uh those who are joining us on the day.

I just want to acknowledge Mr.

Stephen Carter, our city manager, Attorney Derek Challenger, interim city attorney, and Miss Anita Shirai, who is our deputy city clerk.

Thank you all for being here, and I will now ask that my colleagues please note your attendance electronically.

Seven members of City Council are present.

Thank you, Madam Clerk.

I will now turn this meeting over to our city manager, Mr.

Stephen Carter.

Sir, you have the floor.

By all means.

So I can see you guys as I dress.

Sir.

I'm honored to present to you the first look at the budget.

Um for fiscal year twenty twenty-seven.

At its core, this budget is about priorities.

Moving key projects forward, and supporting public safety.

It continues to work on those major capital items.

It continues to shape our future and sets a platform for us for years to come.

Including in this is the relocation of City Hall, a new K through eight school for our public school system, a combined public safety facility, the relocation of Craddock Fire Station, and the completion of our Pace Center for our school system.

It also invests in our workforce, and it supports public the Portsmouth public school system and makes targeted investments in training, in technology, and staffing so we can all perform at a higher level across the entire organization.

When we talk about getting stuff done, this budget reflects that.

But we're interested in execution.

Again, one of the clearest examples is the City Hall relocation effort.

This is not just about moving offices.

It's about improving accessibility.

It's about using technology more efficiently.

It's about opening the door to future development on one of our most prestigious and valuable portions of property.

And that is our waterfront.

When we talk about financial and operational excellence, this budget continues to move us forward to a stronger and more accountable organization.

That includes being better trained, having better systems, and better tools for the people that do the work every day.

It also includes greater transparency for our public.

We will actually launch a financial transparency dashboard so residents can more easily see how their government is using those public funds that we will collect from them.

When we talk about economic growth and citywide revitalization, this budget recognizes that strong cities are built block by block and neighborhood by neighborhood.

Investments in infrastructure, streets, drainage, utility systems.

They're not always glamorous.

But they improve our reliability, they support our redevelopment and create the conditions for private investment and long-term growth.

When we talk about safe, connected, and thriving communities.

This budget makes meaningful investments in our public safety and emergency response.

It supports a more coordinated approach to leadership and public safety.

It expands tools and technology and continues to work of service that our community needs.

One of the things that we will be doing in this budget or advancing in this budget is the idea of a public safety director.

That director will be in charge of all things public safety and be able to coordinate all of those entities into a cohesive functioning responsive unit.

When we talk about education, workforce, and partnerships for the future.

This budget reinforces our commitment to our schools.

Our young people and our residents who are trying to build better opportunities for themselves and their families are all recognized in this budget.

The investment in Portsmouth's public schools, the new K through eight facility, and the Pace Center are more about people than facilities.

They're about opportunities and preparation and long-term success for our community.

Overall, this proposed budget is grounded in discipline, aligned with cities pro the council's priorities and focused on results.

It reflect a belief that Portsmouth can move forward in a strong and practical way.

If we remain clear about our priorities and consistent in our expectations.

One is that the school system has asked for a 14.3 million dollar allocation.

Through working with them, they have reduced that number to 12.8 million dollars.

Unfortunately, we're not able to allocate that full amount to them.

At this at this point, in order to present a balanced budget to you, that school system uh allocation is actually 7 million, which will bring that number, not eight from 87.4 up to 90 89.9 million.

So we'll we'll be effectively investing 90 million dollars into our school system this year.

However, I've also talked to uh Dr.

Bracie about this.

The promise we've made each other is that I will continue to work on the city side to see if there's some room that we can make some modifications, and that he will continue to work on the school system side to see if he can define a way to help us meet somewhere in the middle.

So I wanted to make sure that that you are aware of of that particular issue because the number that is there is not the number that we will actually be using.

But with that, I want to bring up uh Mr.

Trey Burke, our budgeting officer, and he'll walk through some more of the financial details of the FY27 budget.

Trey.

Welcome, Mr.

Burke.

Thank you, Mr.

Carter, for that introduction to the meaningful improvements and initiatives in this budget.

Good evening, Mayor, Vice Mayor, members of city council.

The investments the city manager just outlined represent where we intend to direct energy and resources.

My intention this evening is to walk you through the financial structure that supports those commitments.

The total proposed general fund revenues are $360.7 million.

A 6.3 million, excuse me, a 6.3% increase over the FY2026 budget.

But the composition of that growth matters as much as the headline.

Two sources represent the bulk of the increase.

Real property taxes and fund balance appropriation.

Real property growth is positive despite no rate increase, but it exceeds our historical norm and should not be assumed to recur.

The increased fund balance draw reflects one-time non-operating uses, not a structural expansion of recurring revenue.

Strip those two out, the underlying revenue growth is approximately $9 million or roughly 2.9%.

So while the overall budget went up by 6.3, most of that growth was concentrated in two-line items.

And that 2.9% is the number I'd encourage council to focus on as the measure of our natural fiscal trajectory.

On the expenditure side, Portsmouth public schools remains the largest spending category, followed by public safety.

And that reflects the increase from $82.8 million to $89.9 million in this budget.

Personnel costs, including the 3% wage increase and grade and step adjustments drive most of the year over year growth, with targeted expansions in training and capital, excuse me, training, technology, and capital project staffing reflecting the strategic commitments outlined in the pillars.

The real property tax rate remains at $1.24 per $100 of assessed value.

Water and sewer rates increase by 5% to fund system maintenance.

Stormwater fees are adjusted as outlined in the budget document at 75 cents per equivalent residential unit or ERU.

Those are targeted adjustments tied to infrastructure and service delivery.

Portsmouth maintains three debt policies and is in compliance with all three.

Our debt to assess ratio, so that's the amount of debt the city has compared to the overall assessed value of the city.

Our debt to assess ratio is 3.8%.

The policy limit, so we have to be below 4%.

And this includes the pension obligation bonds.

So any amount that the pension obligation bonds are there is money that's not that is not free currently to invest in the infrastructure of the city.

The ratio is projected to decline, which means as we're paying off debt, there will be more money available as we go.

Our debt service to revenue ratio, and that includes city and schools, so the amount of money for debt service compared to the total expenditures for city and schools is 8.23%, which needs to be below a 10% policy limit.

It's also projected to decline, but this right here, the the 8.23%, that's what drives your debt affordability.

How much money do you have to pay for debt?

And our 10-year payout ratio is 73%.

And what this does is it's basically a check on making sure that we're not extending out and refinancing our debt in perpetuity.

The takeaway, we are compliant across the board with declining ratios, positioning well to do more work in the future.

But this doesn't mean we don't need to be mindful of the affordability.

So making sure that what we're spending in debt every year isn't going up more than we can afford.

The fiscal year 2027 budget includes 10.1 million dollars for the legacy pension obligations, an $8 million for the police and retirement system, and $2.1 million for the Portsmouth supplemental retirement system.

Council has also directed staff to include a $1,500 per participant payment at a cost of 1.4 million dollars.

Combined with the 11 million dollars in pension obligation bond payments and debt service, the total commitment to our retirees is 21.1 million dollars for a 942 participants.

As of June 30, 2025, the combined net pension liability was $63.8 million dollars.

This means the funded status was $75.4%.

This is a substantial obligation, and it is critical that our decisions ensure that the long-range viability of these systems so that every retiree receives what they're entitled to.

On the OPEB side, we're continuing to build a trust fund with 1.5 million dollar contribution.

To date, we have contributed $8.5 million, and that's since 2018.

Staff and advisors recommend formalizing a policy to sustain this funding until the unfunded liability is eliminated.

Public hearings on the budget will be held at regular city council meetings on April 14th, April 28th, and on May 12th, all at 7 p.m.

The hearings will cover the content of the budget and the CIP, but the one on May 12th will only focus on rates and fees.

Staff will also present at work sessions before each of those meetings with topics including the summaries of revenues and expenditures, civic organization support, rate changes, debt and capital, and a final budget overview.

The topics covered in any any individual meeting is subject to change.

Budget ordinances will be presented for adoption on May 12th.

The complete document is available at all Portsmouth Public Library locations, the city clerk's office, and at Portsmouth VA.gov.

To close, I want to thank you for your attention as well as the work you've done to guide the budget document to this point and the work you will do in the future.

Thank you.

Any questions from my colleagues?

Councilwoman Thomas, ma'am.

You have the floor.

Yes, thank you.

Thank you, Mr.

Carter.

Thank you, Mr.

Burke.

Can you go back to um I was trying to understand uh right before were you talking about the revenue growth?

Um okay, right here.

And then I think this slide, the next slide.

Okay, the one before that.

I'm sorry, yep.

This one.

So you were saying that you wanted council to understand that the real revenue growth is 2.9% because you're saying don't account for the real property taxes.

Is that what you were saying?

And don't account for the fund balance draw as that.

Can you explain that a little bit more?

Yes.

So conversations I had with the city assessor indicated that the growth in the real property tax base was not necessarily this abroad across the board increase.

What it was is it seemed to be kind of a land crunch a little bit, where there's not it, there's not a ton of land to build on there for the land that is there is more valuable.

That seemed to be at the time more of an adjustment, like a one-time thing that may not be something that we would want to rely on year over year.

So we we won't see that going forward.

For the fund balance, we only use that for one-time expenses.

So basically, what we were doing, trying to find money to pay for all the the things that we want to do, all the things that we need to do, achieve all the strategic pillars.

What we can do, one of the tools that we can do is take one-time expenses, so trucks, desks, um, even it's a one-time thing.

So if someone wants to build a website or um do a planning document, those can be funded with fund balance because they're not things that you anticipate doing on an every year basis.

Wait, fund balance.

What is that again?

So the colloquially it's kind of a savings.

Okay, thank you.

So it's a savings from the previous year or just saving.

Okay.

Okay, so then the so really the underlying growth, the two point nine percent comes from the next slide of all those things.

Is that right?

I I'm just trying to understand.

So, where's the 2.9% then?

Since you said discount those two items.

So the the 2.9%.

So what that gets at you know, you'll you'll look over 10 years, right?

And you'll see like you'll see things go up one year and then down the next year, and you see like a lot of variance um in the numbers.

One of the things that this year seemed to be is that there seemed to be a one-time bump adjusted to the land value that that and you don't really see that kind of jump in any given year very often.

The point of that was to say we're not seeing a six percent growth across the board.

We're not seeing a six percent growth that we anticipate being six percent off into the future.

Okay.

What we're saying is we think this is a one-time deal.

Okay, so you're saying you really only see two point nine percent discounting that.

Yeah, when you look across it, you're kind of not you're not seeing six percent, you're not seeing six percent.

If it was more if Trey was gonna go put money on what do you think it's gonna be next year?

Do we think it's gonna be closer to six?

Or do we think it's gonna be closer to two point nine or three?

We're thinking it's gonna be closer to three.

Okay.

And then these, and I'm sorry, because you know, I'm gonna have I've had to read things first and then process it.

So I was trying to understand from this slide, you were giving us just additional revenues that were increases, like this, for example, the stormwater fees.

So this was just additional revenue you were uh providing to us.

These are the anticipated fee changes.

Okay.

Yes, ma'am, with with the 124 being no fee change.

Okay.

Thank you.

Thank you.

Vice Mayor Modi, you have the floor, sir.

Thank you, Mayor.

And Mr.

Manager, I know each of us has uh appointments to discuss the budget uh one-on-one.

How would you like uh prior to their those meetings?

How would you like us to funnel any questions?

I am so glad you asked.

What I would really prefer is take a little time, digest the book that you have.

Right.

Whatever questions you have, if if at all possible, send that to us ahead of your meeting.

That way you research that we have to do to make sure that we have the information for you at the meeting.

Uh we'll have that available to you at the meeting.

Now I understand that when you get to the meeting, you'll think of something that you didn't think of before.

We'll be prepared to answer whatever you have, whatever questions you have.

But as much as you can provide your questions ahead of time, and we'll already have the answers for you when you get there.

And fun funnel those to you.

Pardon me?

Funnel those questions directly to you.

Yes, sir.

Okay.

Yes, sir.

Thank you.

Thank you.

Thank you for asking.

We're done.

Any other questions from my colleagues?

Mr.

Carter, Mr.

Burke, thank you both.

Look forward to our individual one-on-ones to discuss the budget for further.

But thank you for and your team for putting in the work to get that done.

Thank you, sir.

And that is the conclusion of his presentation as he has stated.

If there's any, if there is not any more business to conduct tonight, then this meeting is adjourned.

Have a good evening, and we'll see you all tomorrow at the work session at 5 o'clock PME.