Great to have staff here, guests and media who so faithfully report uh council and city work.

This is the first of three study sessions on the budget, the next of which will be nine days from today, Wednesday, September 3rd at RPU.

So not in this uh room, but uh oh a little ways north and uh much closer to ward three.

We're grateful to Administrator Zelms for her wonderful work uh that she has sent out prior to, and I turn this study session on the budget over to administration administrator Zelm.

Uh thank you for happy to help us here and it's budget season, so I'm excited to be here.

Um, I really can't take much credit for this other than it does take a lot of people to put the budget together.

Um, so special thanks before I get started to all the departments for um they've been working on this actually probably since October or November of last year, um, as we uh tried to bring a budget to you that is less than what we had anticipated, and then of course, going through all the regular process of their baseline adjustments and decision packages, and um the people who do a whole lot of work are uh Rachel Hodick in the finance department as well as Josh Doer, um Erin Parish, Brian Anderson.

Um, so it is a labor of many people in order to bring you a budget, and they are still working on getting the flipping book version working for you, but you do have the detail um within the PDF that went out.

So today we are setting sort of a high level, trying to go through this with you.

Please feel free free to stop me if you have questions about something.

Um, for some of you, it's your first city budget doing this from the dais.

So um if you have questions or need clarifications, happy to do that.

Um, and the intent as um acting president Wall pointed out is um that we would based on some of your questions, information that you would like a deeper dive on, um, be able to come to you over the next few study sessions and uh be able to do that for you.

Your strategic priorities made uh in appearance here, and uh obviously you adopted those um midstream of us working on the budget.

Um they are different than the prior strategic priorities, but not drastically different.

Um they are a little bit more focused than the prior strategic priorities, and so we did um adjust uh mid-budget process to try to identify how some of the decision packages are fitting in with your strategic priorities and foundational principles that um this body has uh acted upon.

So you can see it does say that we really start going in February or March, but um the team is sort of always working on the budget, so appreciate that.

Um, also always managing to their budget and trying to make sure that where they can, they don't spend every dime.

Um they try to actually always bring this in under every year, um, and very happy to see that most of the time we're able to do that in most areas, but sometimes we can't.

Um so we're here in August and September.

We're at the the bottom uh step steps of this with the uh recommended budget, and then your next really important um vote will be the preliminary levy on September 22nd.

And so I like to point that out because that is the levy amount over you that you cannot go higher than after that public hearing, or excuse me, after that date.

So um you have the option between September 22nd and December to lower um the levy portion of the budget, but not increase.

Um so just important contacts there uh for the city council as we're moving through the process.

So something to be thinking of is do you have questions or feedback for us about the recommended operating budget?

I would know it's a two-year budget, but we do a supplemental budget in two in 2027.

So we don't try to make significant changes then, but as things adjust, we still will come back to you with adjusted budgets if fuel prices increase significantly or something changes, um, and we need to make an adjustment for that future year.

Um, does this effectively balance your foundational principles and strategic priorities?

Sometimes those are a little bit in conflict with each other, depending on what we're looking to accomplish.

So dynamic tension there and sometimes trade-offs.

Is there anything specific in any of these decision packages that you want us to bring back a lot more detail on?

We're happy to do that.

And then is this where you want to be sitting as far as the preliminary tax levy for adoption on September 22nd?

And the key there is if you would like it to be higher, we need definitely would need to know that now.

It's rarely happened in my career, but there's an opportunity for anything.

And of course, if you are looking for it to be less, it's helpful for us to have an understanding of where you would be interested in cutting, but you don't have to accomplish that by September 22nd in order to accomplish it by the public hearing in December.

So without further ado, um, we did start looking at how can we reduce what was sitting at one point at over 11% levy adjustment year over year increase.

Um, and then with the changes that the city council made last year to the budget, which carried forward, we were sitting down at that about 10.68% levy adjustment.

Um, and we looked at the budget, both the baseline and the decision packages with sort of this financial eye.

We try to use a financial eye when we're looking at the budget.

Um, is there any strategic value?

We don't really have ROI per se in local government, but we do have the value on investment that can be returned to the community.

And sometimes there are revenue sources associated with an item.

Um, does it present financial sustainability?

Am I gonna be worried that I'm coming to you the following year to say actually this costs more than we anticipated, or 10 years from now and say, you know, we should have been working on this all along and now we can't afford to buy vehicles, something of that nature.

Is there efficiency included here?

Are we being adaptable in how we provide our services and not just looking to add new, but think about how we are doing our work?

Um, can we collaborate across departments in order to accomplish something or partner with another group?

Um are we going to be having community impact and organizational impact?

Um, there are parts of our organization that have some pressing capacity challenges, um, and then um what kind of accountability and performance are we gonna have to ensure that as these investments are made that we're continuing to provide all of that value.

So uh the property tax rate slide, important slide, you can see that the estimated 2026 property tax net tax capacity or the local tax rate is hovering right around that 49.7 percent.

So for the last uh 10 years, we have been between about 46 percent and 52 percent in the levy rate.

Um, and part of why that is something we can achieve is because we have growth in our property tax base, both new construction and value.

People tend to want their value to go up, but not necessarily want the value to impact their property tax, but um, that's not how that works here.

So this is still the preliminary estimates.

You saw this earlier in the year.

Um we will get refined estimates from the county.

Unfortunately, it's a little farther into your budget process when we get that.

But we do have new construction at 1.77% that's estimated as as of their most recent estimates, um, and then valuation adjustments depending on the category of property that you have.

So that total growth in the estimated market value is sitting just above 6.5%, but a fair amount of that is coming from new construction.

Um, this is the biggest driver in what is going to impact somebody's property tax bill.

If we didn't increase the property tax at all, it's still going your your properties tax bill would still change based on the value of your property and how it's proportionately different than the other values of property in your class of property tax.

You just said something, you said that the most of the value is increased is with the new construction, but that's at 1.77 valuation adjustments 4.8.

So isn't it a significant portion?

I mean, not it.

There are some cities that don't see any new construction value or barely any new construction value coming in.

But it's because the valuation of our properties are going up, that's what's given us the most amount of increase.

Is that correct?

Giving you the most amount of increase, but you do have a fair amount of new construction that's also influencing your total estimated market value.

Okay.

But and so any change or even the existing property tax first gets absorbed by that new construction, and then the remainder is spread across all of the other properties.

And you can see in the last few years that probably not surprising to you if you're a homeowner, um, that the spread of the property tax and the the share of property tax has been increasing on residential.

Um it's been decreasing on commercial.

Um, but but we saw in the newspaper recently that um that is going to be changing in this next year that commercial is absorbing a fair amount of increase based on their assessed valuations.

Um, and apartment and manufactured homes has remained relatively similar from 2021 to 2025.

So that also impacts the property tax bill depending on um what category, what class of tax um you're in.

So as the costs of city government have gone up, that has been absorbed more in residential and recent years.

And then of course, the beloved local government aid slide.

Um we are um one of many cities that receives local government aid, and when you think about how much we're receiving in aid per capita, um it isn't super significant.

Um when you combine those two things together, the local um uh property tax burden and the per capita LGA, um, you see that each person that lives here it's approximately $945.

But the lion's share of that is coming from local property tax.

Um and local government aid, the formula for local government aid takes into account um different factors that the city of Rochester doesn't do well on.

That's not necessarily a terrible thing because we don't have um declining property value like some cities.

However, that means that the that more of the burden is being um put on local taxpayers and we're receiving less um aid.

But we also rely less on the local government aid than some communities who see it being 40 percent to 60 percent of their total budget.

Another way of looking at that, and I know that a lot of you have looked at it this way, is to um think about the other um cities that are somewhat similar to us.

Um if you look at this from left to right, this is based on population.

So Minneapolis has a larger population than St.

Paul, Rochester, Duluth, and St.

Cloud, um, but they still receive significantly more local government aid than the city of Rochester based on those formulas.

Um, your population isn't a significant factor as the other formulas are.

Duluth again has um increased.

We all increased slightly when there was the readjustment in 24 and 25.

Um, and when that adjustment happened, we dedicated that to capital because that's a less volatile um expense for us, and we continue um with a formula that's not incredibly favorable to us.

Mr.

Palmer, do you have a plan then to either get more government aid or or what do we what how are we working on that so that it changes?

Or if it's not going to change because of DMC and other funding, it it I mean, is this just a dog that's not gonna bark for us or well, many cities across um the state receive local government aid and they're very reliant on that aid, some of the smaller communities.

And there are cities that don't receive any local government aid based on that formula.

Um so considering the numbers that you would need to get to at the Capitol, I think it's we can dream that something might change, but it's highly unlikely based on the last 20 years and how little has changed in the local government aid formula.

We were um helped out in 2024.

Um I would say is one of the things that we do try to do is weave this conversation into our conversations at the Capitol and try to make sure that there are resources that can come to Rochester, whether that's bonding or other um sources of funding, so that it makes up to a degree for some of that lack of local government aid.

So Woodbury does not, I think Bloomington does not in, you know, if our is our plan a dream or a hope, or are we are we just is is we're just gonna take that and use it for once in a while expenses and not count on it for budget.

I mean it we're it it's valuable to have the local government aid.

I think it's probably unlikely that the formula changes significantly to really help Rochester because what the formula is telling us is that we are able to support the costs of government locally.

Now, having said that, we still again utilize this as part of the conversation for why we might be going to the state and asking for other sources of funding or to make sure that we are, for example, eligible for bus rapid transit funding that primarily has gone to the Twin Cities area.

Um so we have some differences to us than every other city and every city has different likes to share their differences.

Um but but we do try to make sure that this is part of the conversation.

For example, if we need to be able to grow and have new construction, we need to be able to have capacity in our sewer system.

Some of the rapid growth that happened um in the uh early 2000s and late 1990s had us expanding our utility system significantly, and now we have parts of town that would potentially like to develop, but we have aging sewer pipes that aren't not at their end of life, and they don't have the capacity to add some of that new construction.

So that's one of the conversation points we have.

If we're relying on new construction to absorb some of that property tax cost, then we might need some help in order to be able to free up capacity, whether that's infill or on the edge.

But primarily that infill gets challenging.

So that's why we had brought that um project to the legislature last year for our sewer capacity.

Mr.

Miller and then Mr.

Keene.

Oh, Keene first.

Yeah, I again I appreciate that we're gonna I I'm not sure if we're gonna do these part by part, but I did want to just add in because of the uh the local government aid thing.

We always had the capability of making this our legislative priority, but year in and year out, I I believe we don't because we don't think we have the leverage.

There could be things changing, and there is a fairness thing here, but I think I uh is a budget meeting right now.

I take this as a given and not as something that based on a budget discussion, we should be fighting it.

But I I do want to point out that we can make this our fight if we want to.

I I wouldn't support that.

I just don't think because of as you say, there the other places that are much more dependent on it, and to get us to get changed the formula, it's it's it's a slog, and it's not where we should spend our legislative time from my perspective.

But from a budgeting perspective, I think it's important to know this.

And I think residents do look at this and say it's why not us.

But every city has its own bucket of pluses and minuses.

You mentioned the bonding stuff.

Uh there St.

Paul looks at us with our DMC money and say, why would we give them any more?

So I I'm more sensitive to that.

I wish it were better, and I know Councilmember Palmer has been pushing this.

I wish it were better too, but I don't see it as a priority or a budget statement that says this is where we should spend our time.

Please proceed.

Thank you.

Um we also have a number of other significant um budget factors that are influencing um how this budget comes forward to you, whether those are revenue or expenses.

Um so again, the local government aid likely continues, but um it's still at that lower amount than what some other communities receive.

Um we have a significant number of transformational community and capital projects that show up primarily in your CIP, but also um there was the addition of teammates to be able to bring those projects to life and still do all the other projects that happen on an annual basis and for other um private investment that's happening around the city.

Um we have some inflation that we are absorbing in some of that's in capital, and some of that's in some of the other line items, as well as um labor cost adjustments.

We have um 20 labor units in the city of Rochester, and nine of those are up for maybe we have 19.

Nine of those are up for um review.

Uh we've continued to chip away at the vehicle and equipment revolving fund that has required additional funding because the way that the um fund was revolving wasn't actually keeping up with the cost of vehicles, um, which has increased significantly in recent years, but we are adjusting those formulas for some of that long-term sustainability.

Um, paid family medical leave is implemented in this budget, which is a 0.44% on all of the salary for uh positions, and we have introduced the idea of central service allocation, so costs that are um in a levy funded area also supporting non-levy funded um services are having a cost allocation now in this budget.

Um otherwise that would have been tax levy.

In lieu parking storm water and sewer fees also um are recommended to be adjusted in this.

You haven't adjusted that since 2020 based on a resolution from the council at that point when we had the zero levy.

We also didn't adjust any of those in lieu fees, and then budget optimization that I had mentioned.

So we have some one-time increases in revenue by really combing through and trying to still not over-project, um, and then some decreases in expenses that we believe are sustainable for the long term.

So continuing to really show our work.

We we do this every year, but we had a target this year to really um have our departments look closely at what their opportunities were to um make adjustments.

All of that rolls up to a recommended tax levy of 118.2 million dollars.

Um, the total recommended budget, including Rochester Public Utilities is setting at 663.85 million.

And of course, a lot of that is capital improvement projects, but some of it is operations.

Um, so 5.9%, that's the increase.

So 6.589 million is the increase in tax levy year over year.

So last time I was here, we were looking at a tax levy of about 11 point something million.

Now we're looking at this new amount, and that is a 5.9% increase.

It is not the tax rate, it is just the difference between last year's levy and this year's levy shown as a percentage.

The dollar amount is almost 6.6 million dollars.

Um, we also have um rates for our utilities, so um the sewer rates as that's been the trend with their current uh rate study are going up approximately one percent.

Um the connection fees are looking at increasing it about 2.7 percent annually.

Um, those are really adjusted based on um inflation and the cost of service and providing treatment um at the plant due to new construction.

The electric utility is um showing in their budget right now as a six percent year over year adjustment in the rate.

You can see that that's about five dollars and seventy-eight cents a month in 2026 and six dollars and twelve cents in 27.

Um, there is an alternative, but a lot of things have changed um for Rochester Public Utilities and um Tim McCullough will uh talk a little bit about that on slide 55.

Um and so that is an alternative, but we always want to carry the larger number to ensure that um we're building the budget around that.

If there is a different decision that's made, there is a potential that it would be four percent.

The water utility based on their cost of service study is coming in at a nine percent increase, which equates to about two dollars a month in 2026 and a little over $2 a month in 2027.

On the right hand side, you can see some comparison numbers on the total budget, and usually the largest changes here are going to be in your debt service, which falls some of which falls off, some of which comes on, and your capital improvement program.

We do have some adjustments to operations this year as well, um, and you see that changes in 2027.

Um, a lot of that is related to the service purchases and how the debt comes online for Rochester public utilities.

So, where does the money come from?

We talk about the tax levy it a lot during the budget.

Um, however, you can see that it is about 17.8% of the total um revenue coming in to support the budget.

Um, the largest um thing that actually supports all of our services is charges for service.

So those are your utility rates.

Um, there are some charges for service for recreation programming, things of that nature.

Um, but that is a large part of your budget, but that's also you kind of you need to have clean water in order to be able to live in the community.

That is a quality community.

So those are 24-7 services that are going on in the city of Rochester.

A bit of intergovernmental revenue at that 14.5%, um, and then some miscellaneous revenue that comes in, a variety of different types of revenue for services that we provide.

You see a bit of a larger use of prior year reserves or revenues and fund balance, and that's also primarily related to capital projects where we've been built building in dollars through rates that are charged, and now a project is coming to fruition and we need to build it.

For example, the water reclamation plant has a $92 million dollar project going on.

We've built that into the rates over time.

We don't adjust your rate by 25% and then build something.

We build up some reserve in order to do that.

So another way of looking at it baseline budget.

Um I have a question.

Excuse me.

Yep.

I know you're getting used to it.

Uh, just for clarification, like the enterprise funds.

If you go back one slide, are those included in those charges for service funds, or are those separate.

That's a large part of that.

That would that's the lion's share of that.

Okay.

Okay.

Um, so significant um changes that are happening in the baseline budget.

We're addressing those equipment revolving um funds needed in order to continue to provide services not on horses.

Umployee services, um, it's a significant amount of that increase every year.

Um, we say on average it's about 5.5%.

Um, holistic budget stability funding, a little bit left this year, um, but in 2027, that goes away completely as we've built back from the pandemic.

And then we actually built capacity to be able to include some decision packages.

They are um run the gamut, and we'll go over those.

Um, and although the outside agency requests that came in were 21% higher than prior year.

Um, you've seen that a few times.

The recommendation built provides about 5% in 2026 and a bit less in 2027.

If we're asking our departments to use a lot of caution in their expenses, it doesn't seem like it'd be reasonable to provide a 21% increase to the outside agencies.

Um, so this is a visual that gives you some perspective of how these costs break out.

About 4% of the adjustment is in employee services costs, those are existing employees again.

Um we are absorbing the reduction of holistic budget stability funds.

So that gets absorbed into the tax levy for services that we still need to provide.

Um we have the adjustment that's a little less than one percent for equipment revolving fund stabilization that helps us in the long term.

Um, we had um some other reductions that we made that helped out the levy adjustment, and then those decision packages for new services or adjusted capacity.

And you can see what we absorbed in 2026 for uh holistic budget stability funding was about 400,000 that needed to come back onto the levy, and over time we've been reabsorbing that into the budget.

Ms.

Holmes, uh going back to the previous two slides.

Uh it appears to me that the decision package on slide 17 is part of the 5.9.

It's part of the 5.9, the decision package.

The previous slide kind of looks like is an addition to the 5.9, but it's not, it's supposed to be included.

Um we're just denoting that that is the amount that is necessary in levy if those are to if those are approved as recommended.

Uh another way of thinking about um the budget.

So a 10.9 million dollar increase in the general fund.

General fund is very reliant on tax levy.

You'll recall that the increase in the tax levy amount is about 6.89 million dollars.

Um, so there's a lot of adjustments that happen in the general fund in order to be able to do this.

Some of that's the allocation number, but public safety 24-7 service, those are there are a lot of people involved in that, and a lot of personnel costs that need to be adjusted there in order to meet our contractual obligations, and quite frankly, be as fully staffed as possible.

Um, general government, um, I'm in there, you're in there.

Um, public works, and then other includes things like the central business district, um, some of the outside agencies, um, things of that nature.

So the distribution of the property tax, a couple ways to look at this.

The general fund again, very reliant on the tax levy.

About 70% of the tax levy is going to fund the services that are in the general fund.

Um, but we also are very reliant in parks and recreation, the library, um, the capital improvement um program, it receives some property tax levy, not a huge amount, but um about 7.8 or 7.9%.

And then a very small amount goes to the airport.

Um, the city is obligated to pay for some of the customs control and then the uh portion of the utilities at the airport.

But the lion's share of that is paid for by revenue at the airport.

Oh, debt service.

Skip that another way of thinking of it, if this is the entire um expenditure budget for police, fire, public works, um, the rec system and library on the left in blue, and the tax levy support that's um necessary in order to provide those services is in yellow.

So very those are very reliant on the tax levy, and those are the areas that you would be looking at if you were wanting to reduce the tax levy more or increase it.

You never know.

Um again, another way of looking at that.

So the library, about 87% of the library services are reliant on tax levy, and that doesn't include the tax levy that the county provides.

Um, parks and recreation, again, they have some charges for service, um, and they have some uh partnership agreements, uh, but then the general fund, that's where you have public works, fire, police, um, some of those services, and then the debt service fund, we are picking up some um debt service for the move of the maintenance facility north.

Um, but we also have other debt service that falls off over time.

Airport, about 12% of that operation is reliant on tax levy, and it's important to point out that the DMC capital projects do not come from tax levy.

There's operational support, but even the operational support is coming from the DMC dollars.

So how did we get to 5.9%?

Well, this chart used to say 11.

Um, we did a lot of changes across all of these different funds, but you can see as we project out, we're also projecting that there will continue to be adjustments and increases.

Personnel costs are really generally never less, unless you are reducing personnel, which has an impact on your services.

Um, but this is what we're projecting out.

This includes some assumptions in it of changes to inflation, costs of service, uh things of that nature.

Um, but this is a better trajectory than what you've seen in the past, but we're also not um trying to come back from a zero levy, which is actually less revenue.

And we didn't need all the people during the pandemic, but when we reopened, there was a very high demand for services.

So that's where we're sitting in some of this uh projection, and that's the major drivers to your tax levy every year.

Another way of looking at it, just in a chart.

So um again, last year's long range plan included um a projection of 10.68 percent year over year levy necessary in 2026, and through this hard work of the departments, we were able to get that down to 5.9.

Another way of looking at all your major revenue.

And um I would say it's good that those are um generally increasing.

Um, cable TV franchise fee regularly goes down.

Um, and so um that is part of how we are going to be um navigating the upgrades to this room, but um we do try to dedicate those funds because it's an enterprise that isn't increasing in growth every day.

Someone takes on a subscription service, there's less cable service revenue coming forward.

We did break out in the inspection permits um service fees and the bold forward unbound anticipated revenue in this chart.

Um, so you can see that there, which is going to support those positions that were added.

Um, and that's we we anticipate a lot of those um building permits coming in in 2026.

Um, but again, we're holding that all sort of as a fund, um, and so we won't spend all of the five million in one year that spreads out over um the life of those projects.

I have a couple questions for you.

Um permit fees, the the trick on them is that the big dollar amount comes in today, and then we do the work, and then two years later, if we we think we have a lot of money, we really don't until the end of the project.

Am I seeing that correctly?

Well, for something like bold forward unbound, yes.

And for some other things, we don't always know that we're getting the permit fee because someone magically decides to develop in an area.

Um and obviously there's quite a lot of process to that if it's going from greenfield to actually develop developing.

Um we do we have finance watches this very closely, um, the building permit revenue, and I know that deputy administrator Steinhauser is also looking very closely at the bold forward and bound specifically because we have um people and positions tied to that that are not intended to last forever.

So intended to be paying.

You brought up bold forward.

So if I drive down the highway, or dying not the highway anymore, down third avenue, and I see two policemen saying there's bold forward paying for those wages.

Um that is actually different.

Um, so the Mayo Clinic ha is paying for some.

Uh, I mean, it depends on the day.

It it might just be coming from the police budget, but they actually have been um Mayo Clinic outside of these dollars has been paying for the additional patrol and um traffic services.

Okay.

My my next question on this page is and this is a discussion we have every year is the gas in lieu of taxes.

Why don't we have a uh the gas tax on the um in lieu of taxes?

Um I think you're speaking to natural gas franchise fee.

Um we have never instituted a natural gas franchise fee.

We talked about doing that um and started having that conversation probably a year or two before I arrived.

Um, and then when we were getting ready to have more detail of the conversation, there was a very large increase in the rates that were necessary for natural gas, like double digit increases.

Um, we were moved forward with the sales tax that included um streets reconstruction.

What we had been talking about was um the natural gas franchise fee for streets at that time.

Um, but that's something that the city council could initiate, and it did come up as part of your um strategic plan and action plan.

Ballpark, what that would raise in funds?

I don't have that off the top of my head.

It depends on how you charge it and um what we had brought forward in a prior study session.

There's trade-offs to how you might charge that fee.

So if it's a flat rate, someone might say that's more fair because a larger entity would be paying, but one of those entities is Rochester Public Utilities, um, would also see significant increases which would spread to the ratepayer.

Um, there's a number of different ways that you could apply something like that.

And I think I want to say that the range was somewhere between 500,000 and 2 million, but don't quote me on that.

Um we I can pull that information up and send it back out to the city council, or we can add a slide for the next study session.

I just don't have it off the top of my head.

Mr.

Miller.

Yeah, I I appreciate the question about the franchise fee.

I'd be very interested to know what that might raise, and especially thinking about some of our broader goals, the conversation we'll be having about 2030 versus 2040, right?

Reliance on gas, our emissions.

Uh, I I think it's an important conversation.

I'd love to know how much that might raise.

Uh a similar question I see in the uh hotel motel tax or the lodging tax.

Are there assumptions built into that growth related to the Rochester sports recreation complex in this slide?

Uh council uh council member acting, council president.

Um we don't have that assumption built in here.

We utilize a report that's provided um from I can't remember their name, JL.

I know they're I know their acronym, um, but also our star reports.

Um, so Smith Travel Research provides occupancy and information about how our daily rate um cost for each room night um is faring as compared to other um communities.

So we've continued to see small increases in that.

Um we didn't predict what that might be, but what we've done with the um the lodging tax is there's the four point, I'm not gonna remember the number.

There's specific dollar amount that goes to the civic center for operation.

Um there is an amount that goes to the sports um Rochester Sports, a specific dollar amount, and anything beyond that we're using to fund um capital replacement, um, but that could be a future conversation as that continue.

We do anticipate that it will continue to grow.

I would say these are somewhat conservative projections.

Um but while construction will help our roommates and a new facility will help our room nights, we don't want to over-project that until we have some real numbers on what that is.

Thank you.

I appreciate that.

Final question or just note is that we are not able to assess the franchise fee on internet only providers, although they operate in our right-of-way, and that has continued to be a priority of the League of Minnesota cities.

And uh hopefully there may be some action on that.

But I I would look forward to opportunities because particularly the cable uh companies are not the only internet service providers, and there are fewer and fewer cable companies.

So just noting as we see that challenge.

Correct.

Mr.

Keene.

Uh yeah, again, just commenting on this area uh as opposed to the overall budget stuff.

But on the permit accounting, when we do these permits either up front or at the end, do we do accrual accounting on them or do we really just have a cash system that we assume the when the money comes in, it's already uh spoken for?

Uh we don't do accrual accounting, but when we're building the budget, we and we assume based on some of the pre-development meetings that have happened and um stages of development in different areas, what we think we will be bringing in.

Um so it's a consideration for how much cost there is in community development, for example.

Um I can't answer whether we do accrual accounting, I don't believe we do, but we are always measuring our costs relative to the expense, and we can do that based on the revenue that's I appreciate it.

And I know it's difficult, but it this is a normal business problem of do you do all your work and then get paid at the end?

And if you have an accrual system, it softens those blows or makes it more realistic for decision making.

Whereas if you do a cash system, you can really make some decision making mistakes.

I think you can probably do it either way because if you do the accrual system and somebody doesn't bring their building permit in, then you've you've accrued something that you'll never receive.

Okay.

Um and on this discussion with permits and cables and franchise or the uh cable franchise fees going down.

I I understand that.

I think it's reflects the the world we live in.

My question is just on the access to our right-of-ways.

Do we benchmark how we charge for access to our right what right of way?

Or would when we had a franchise fee for cable, did we waive that because they were doing the paying the franchise fee?

But if they're doing other work in the uh how do we charge for people who are doing other work in our right-of-way, do we charge for that, or do we just assume they're doing community service?

If you don't have a franchise in the city of Rochester, you have to get a permit.

You should be getting a permit every single time that you're touching the right-of-way.

But having the franchise and the fee associated with it does preclude you from charging for certain things.

I believe that we can still charge for lane rental, but um, even that gets questioned typically.

Yeah, I I guess if I um my observation is uh that the if the cable is going away, or that that's not a good uh you know, I'm I'm good with that, that we can't do that.

And I know from the federal law we can't charge on the internet, but we can do take on cost and charge for access to our our uh right-of-way, and I hope we know the best practices on how to do that.

And we do that for anything that doesn't have a franchise.

It's one of the things that you gain by having the franchise fee is that you don't have to go through all of that permitting.

Yeah, the problem I'm seeing is they have a franchise fee to do cable TV, but 90% of their business is not doing cable TV, so it's it's sort of bothersome.

Um, creature of the federal law that you're mentioning, and as that started to change, nothing ever changed at the federal level to allow you to actually franchise it.

And and just my comment on the gas uh um franchise fees.

It was something we studied, and it to me it is not as clear decision that we should do it to raise more money because it really is it's very clearly the residents of Rochester paying those fees, and it and those are fees coming back to us from our residents.

So it it's not like a free thing that we get new new revenue because they're in the in the right-of-way, it is really charging our customers, and that's why I think we worked pretty hard to not use that a couple years ago.

And and I I appreciate that we're not there yet.

It is in your strategic plan.

But for a future decision.

Okay.

Um, so this is an updated version of this chart.

Um, you probably maybe you don't recall, but the green line used to say 17%.

Um, one thing that I would just note here is that um a lot of the increase from 17% to 22% is related to the 14, and I believe now we're at 15 positions related to bold forward unbound.

Um, so those are um not generally going to be ongoing.

Um they're not intended to be ongoing.

That would be future decision if they continued beyond um unbound, either one or all of them.

Um, so that would be a decision package that would have to come forward if it was going to come from a different funding source in the future.

Um, but again, keeping up with the growth of the city is important.

A lot of this shows up in some of your capital plan, but there are costs of maintaining and day-to-day operation um related to how large the city is, how many miles of streets you need, the number of parks that we have.

And so these are some policy items.

It's actually probably reflective of some of what showed up in your strategic priorities.

Um do you need a park for every single development, or do you need to have better connections to parks um so that um the existing resources can get used more effectively, those types of things.

Um this is dedicated to the cost allocations.

Um, so again, cost allocation, it's a really about assigning indirect costs that um are being provided uh to different services.

So it's what you would consider overhead in a business um HR.

If they're not overhead, they're really important.

Um but in a business model, they're considered overhead.

So we have one department for that.

It's paid for in the general fund, but it's providing services to all of the other funds, not just tax levy funded services.

So there's it spreads those indirect costs for support services to the other for the most part utilities.

And it helps to show that if, for example, HR didn't exist or if that was a standalone service, they would need to have some of that overhead, whether it's a contract or employees, et cetera.

And so this is a pretty significant change to your budgeting process.

It's common for many cities to have this, but it's new for you in this 2026-2027 operating budget.

We did spread out the allocations over at two sort of gear up over two years instead of doing that over one year.

And the total in 2027 would be about 2.1 million dollars.

Now, as some of those services changes, change, if there's cost increases, et cetera, those same formulas would apply, or perhaps at some point we'll do a review of all of our costs of service.

So I have a question on that slide.

We have a 311 system that we implemented.

Supposedly it's better quality service for our residents, but also cost savings to us with all the departments.

So how does that get instead of having one department get a hundred phone calls and only get five?

How do we get that back to how does that cost reflect back to us of savings for us?

I don't recall exactly how we reflected 311 in the cost allocations, but we can bring that to you in your future study session.

But you can see here that it's they're all they're not all the same percentage, right?

Because we're trying to accurately reflect, like I show up in some of these, but like one percent of me.

Um some days it's like a hundred percent of me.

But we're not trying to go for you know it being perfect, we're trying to implement this as sort of a structural shift to your budget.

And there may be a time in the future where we would want to do a really specific review of some of those different services and understand where that value is.

Um again, the um service allocations are coming from these different services on the left and the value they provide, and they're going to the different services on the right.

So it's sort of it is somewhat commensurate also with like how large their operation is and how many people they have, um, if it's for HR, for example, if it's IT, you know, that's generally going to be like devices and the cost to support that.

But if it's just a person and some of their time in supporting it, then it's more of a straight percentage.

We've always had a little bit of cost allocation by like item by item, but this is a much more robust use of cost allocation.

And it won't be drastic increases like that in the future.

You would be adjusting based on how the budget adjusts in the future.

Or if we think we need a change to how the allocation is being applied.

Now, cost allocations are different from in LU, and so the payments in LUM come from parking, wastewater, stormwater.

There will also be payment in lieu from Rochester Public Utilities, uh, water and electric.

And you can see that zero percent is we haven't been increasing this in the last few years.

Um, so we were looking at a 4% and a 2%.

Um it's not a drastic change, but if I'm stormwater, it might feel really like a drastic change in 2026 to be paying about 40,000 more than I had in the prior year.

But again, the costs are going up in those levy funded areas.

And now is where you start seeing that there's really different ways that you can apply payment in lieu of taxes.

Um, and the way that this works for the electric and water utility is is a formula that you can ask Tim McCullough about when he comes up.

It involves standard deviations, et cetera, which is very different than how we apply that in the parking uh stormwater and wastewater utility.

Um, you could and so this is we've had some years of inflation, etc., and that was driving some increases in the past, um, and now you're seeing uh but a more steady um year over year change for Rochester Public Utilities, put them all on one side, and we maybe want to look at how we apply payments and low of taxes in the future.

But it's it really is uh depending on the formula that you're using, how you're gonna see those changes occur.

So a few of the key operational investments, and I like to call them investments because we wouldn't be doing them if we didn't think that they would have value for the community either through better service or better provision of different um services to different parts of our community.

Um I could go through all of these, but I have a feeling that we will probably go through all of them or some of them at a future meeting.

But we did try to align these with your new um your new strategic priorities, and you start to see very quickly that some of these could fit in more than one bucket, um, or maybe some of them could fit in all of the buckets.

Um but really a couple of things to focus on is the four library customer service support assistance.

So those are we're intending to shift from part-time to full time over a period of time.

So the full cost of the for library customer support assistance is in the budget, and over time, if there isn't a reduction in the number of part-time hours, that will happen through natural attrition.

Looking at the personal protective equipment that's required in order to meet the National Fire Protection Association requirements for fire.

We need to have two full sets of turnouts.

We did the first set of those with the public safety one-time funding, but we need to continue to provide those over time every time we get a new firefighter, they're going to need two sets of turnouts.

If something happens to a set of turnouts, it needs to be replaced.

Some snowplow sweeping software, so trying to do things more efficiently.

But also we want to make sure that you can get to your this is maybe the most literal application of housing access that we've seen used here.

Someone might also say that that would fit well with economic resilience, but you do need to be able to get in and out of your street and go to work in the morning, whether it's snows or not.

So the maintenance service center is going to require some operations.

If you've been to the existing recreation operations center, it gets a lot of maintenance, but it could never have enough maintenance to overcome its age.

Development services, some contracted services there.

We have some positions that are really difficult to fill.

And so now we have to try something slightly different.

You can see shelter restrooms, playground, and parks activation, looking at trying to make sure that there's more activity happening in places so that other activity that's maybe some concerning to some park users isn't happening as much.

Again, while we have to operate the maintenance service center, we also want to make sure we're maintaining a new investment appropriately over time.

And then a management analyst that's focused on ADA accessibility.

It's not solely focused on that.

We will want to have a person that has a data skill set, etc.

But a fair amount of their work will focus on that.

I skipped the digital content assistant.

I'm not exactly sure how this showed up in the decision package details that you received, but this this is a good example of something where we talk through during the budget process.

Adding a full-time digital content assistant is like $140,000.

But providing two part-times is like less than half of that, and you get you know more coverage and more people over a period of time.

So that's what a good example of starting with an idea, iterating on it, and then applying some of those budget principles to come forward with additional capacity based on what we're seeing people being interested in, which is graphical representations of things and not just words, and being able to do that cost effectively.

Arbor's position, this first Arbor's position that's been added in the city of Rochester in decades.

And it's related to being able to maintain the boulevard tree system as well as trees that are in other public areas.

The park and CSO, that is a seasonal CSO position that is intended to pair with the play ground and restrooms and shelter activity to be able to have a little bit more focus on some of our higher user parks.

Two community service officers that also includes vehicles.

So growing our community service officer program, the full-time program.

We've seen a lot of success with that program turning into retention for future officers.

And they do a lot of, they help a lot around town.

And quick question on that.

Are the vehicles added EVs or why is this environmental sustainability stewardship?

That's really related to the fact that they will also be focusing a lot on parks and in the summertime when we have more activity happening there, but you could probably put it in economic resilience or foundational principles.

Okay, yeah, I was curious about the foundational principles.

It seems like public safety is clearly there, and it seemed like a harder stretch to be environmental responsibility.

We a lot of the conversation around this did focus on the park system and assistance there that's beyond the capacity of parks personnel.

Um, but again, you could probably make arguments for all of these to be in a different place.

Um then the reclass of a transit project manager.

Um I don't know if you want me to keep going through these or not.

If it's helpful, I can provide some context.

Reprioritizing an existing full-time equivalent employee to through attrition to create an artificial intelligence implementation strategist.

So thinking about how can we work smarter but also do that with some guardrails in the city of Rochester facilities vehicle.

Um that's just a new vehicle because as we centralize facilities, we didn't provide them vehicles, and that's a kind of an important thing to be able to provide facilities management.

Um, adding a building inspector that's directly related to roofing, windows, and siding, so there is an off actually more revenue than the cost of the building inspector.

Adding a vehicle for the unbound positions that are unbound across downtown.

Reclassing the DMC project manager for construction to an assistant director.

So this isn't a new position, it's just changing the position that they have, which uh oftentimes results in a change to their salary.

Uh technology forensic detective.

Um, this is really focused on child crimes, internet child crimes.

Um, seen an unfortunate increase in that um across the country, also in Rochester.

Um, adding a 311 customer service specialist, um, so making sure that we can we have two customer service specialists and a supervisor right now.

The supervisor position is answering calls.

This is an effort to improve the response that you're getting and to work with departments to make sure that how they're utilizing their piece of 311 is as effective as possible.

Um, two community connectors.

We currently are um have been piloting uh 10-hour week community connectors too with some holistic budget stability funds, and we're recommending that those become um permanent within the city budget, um, well, permanent as the budget can be and funded.

Um, they are again 10 hour week positions, so it's not an incredibly costly position, but it really helps us connect with both the Somali and Spanish speaking communities, and then an IT systems administrator that's focused on all of the growing technology that we have in public safety would work out of IT, but a lot of focus there on public safety.

Mr.

Doran.

Uh just going back to the economic resilience and the library customer support assistance.

Did I understand you correctly saying that those that's an addition of four full-time employees without the reduction of part-time at this point, is what's being proposed?

Correct.

This budget does not include any of those reductions that were brought up on the slide for you to talk about because they would have implications to service, but there have already been working through attrition to be able to, if there's part-times that are leaving, they're not necessarily replacing those hours at the library.

Okay.

Thank you.

We have Miller Palmer and Keene.

Okay.

So I have a question related to a couple weeks ago we talked about the action plan, the draft action plan, and how those are still developing into specific actions.

One of those actions was or tactics was city fleet electrification.

Are any of these vehicles in the decision packages for 2026 or 2027 proposed to be EVs?

Your Honor, at this point, um, I think what we do for vehicles is we we have like an overall request through the equipment revolving fund with all that, which is not here.

So there's a few vehicles here, but generally our overall replacement.

Um there are some EV vehicles included uh with that, but we do try to assess, you know, the is it a good fit?

Do we have the infrastructure on site?

Um, I would still say we're you know still purchasing a fair number of non-EV vehicles, but you know, there is a strategy.

But I guess that's what I'm trying to understand because we're talking about two years of budget and we're talking about an action plan.

I'm just trying to understand how these two things interact.

Um, and just again, like looking at responsible environmental stewardship.

See some stretches to try to put things in there, but I I it I don't read these things as what we discussed in our strategic priority session, uh, particularly around environmental stewardship.

So we can don't even have the funds to replace the existing vehicles, so we have to build the funds to replace the vehicles in order to also potentially have them be EV.

So the example, I think we had the um maybe this was last year, uh, the transit um vehicle conversation and the cost to go fully EV, you needed something like three million dollars a year in property tax levy in order to do that.

Okay.

I I'm just bringing I'm just trying to understand how that's a city or a potential action plan, and then I guess when we get to Rochester public utilities and there's like 1.5 billion dollars of investment, that will also be maybe an example of that.

Um, but again, most of what we're doing is operating a city and trying to provide all of the services, whether that's police, fire, community services from the building inspectors and from our planners, etc.

All of those things are not going to have a component of every strategic priority.

Um my preference would just be to remove these items from or move.

We can find other columns.

Yeah.

Mr.

Palmer?

Yeah, I got lots of questions on this slide.

Um your DSIC contracted services is that is for people that were we're hiring and that's to contract for the service versus higher position that we've had trouble actually filling the position for like a year and a half.

So you got a building inspector in there.

Why wouldn't you put that in that spot in and do that with contract um employees?

That wasn't the recommendation, but we can give you more detail at a future study session about why we think this would be more cost effective, but you're gonna kind of like to permit revenue that's in excess of this position.

Your honor, just on the the DSI contracted services, that's predominantly focused on snow removal.

So it's a little bit of a apologies.

What do you mean by just in that location?

Right?

Contract snow removal.

Currently, we've got a surplus vehicle that we are utilizing for snow removal on the site.

Um we're either gonna have to replace it or contract the services.

We don't have the staffing on site to do the kind of snow removal that the facility really demands and needs, and so this would really just be for contracted snow removal for that piece.

Okay.

And so I'm trying to lower the 5.8%.

And so I'm looking at the digital content assistant, not really knowing what that person's doing, but can't that be infilled with what we have now with our communications people?

I mean, do we have a work plan for this?

That that this work plan is what we need to fill.

Yes, we have an incredible work plan for communications and engagement, including a newly added item that's related to building better public meetings that probably will benefit from having graphical information for people who aren't necessarily gonna want to read our agenda.

Um, but this is all related to the existing capacity challenges that we have and being able to deliver on what all of the different departments are looking for for making sure people are aware of program services, the open hours at the gym, et cetera.

And it does take a special skill set to be able to do graphics and digital content.

And the for library customer support assistance, my understanding was that we were were re not having the part-time, and these were gonna be full-time.

I don't get where the 193,000 if it's it's if it's a swap, but now you're saying that we're just hiring more library?

There's a recommendation to make the library more full-time focused to get more efficiency out of those positions and require less supervision and less logistics for all of the different people that are necessary to work a 10-hour day and schedule them, et cetera, or 10-hour week and schedule them or an 18-hour week.

And there is still an option for the city council to remove to remove funding for some of those part-time positions.

Um, but if you and if you did that, you would be lowering the recommended levy.

There didn't, I wasn't I had never really quite heard if there were four people that were interested, but we are can certainly like provide more information at one of your next two study sessions.

And then the other thing on the library that you had put in there um taking one of the days off and in closing the library either on a Monday or on a Sunday, and that was a cost savings.

I don't see that in here.

Is that correct?

That conversation about the 1930 and the part times is related to closing on a Sunday or a Monday.

And so we can have that conversation.

What I had explained is that I built a recommended budget that included funding for all of those things on that list, and if the city council wanted to change your service level and adjust those that you are I I'm providing those to use to you as opportunities, if we can discuss that further at a future council meeting and how that works together with the four library customer support assistance.

Okay.

And I'm in favor of doing that, so so I'm one of those people that are because I'd like to get this this levy down even more.

Um I'm looking at BRT maintenance personnel.

Is that in here?

Uh that is in the capital.

Where is it?

There is BRT maintenance personnel, it's not levy funded.

It's not levy funded.

Correct, it's in an enterprise fund.

Okay.

And then the the maintenance person for the forestry building.

If if we are right now maintaining the building we have, why would we need to add another person?

We're just removing one building to another building.

Um I would argue we haven't maybe been fully maintaining the building that we have, and if you're gonna invest 40 million dollars in a new facility, you should probably properly support it with maintenance that is dedicated maintenance with our um centralized facilities process in order to make sure that you're gonna get the most value and life out of the possible.

That's the reason that we're recommending it.

Well, I'm I I guess I I'm on the park and running.

You know, do things here and there, clean up the floor, etc.

It's really about systems and the building envelope, things of that nature.

I don't know if you have anything to add, Deputy Administrator.

Yeah, your honor, I think this is also a uh impacted by the uh increased square footage.

So if I recall off the top of my head, I think you're going from 100 and or 60 to 115,000 square feet, and so you do need to accommodate the increase in footage.

And I think I think we could all agree that the current facility may not be being maintained uh appropriately.

But we're sharing that with with with public works and transit, and I mean, so so I would I would think that that would be an area to save, and if it's not, then we can come back in a future budget budget year and say we just can't make it work.

So that would be my suggestion.

What can you explain a little bit further for me?

Certainly, I don't have it sitting in front of me.

I'm hoping to phone a friend.

But essentially, it's to be able to have some more seasonal employees to be able to activate those areas.

So you would be doing you would maybe be having certain activities there that typically we don't have.

So it's not just sitting dormant, um, also could be helping to open and close, et cetera.

I think director Wedman may be in the best position to answer that or provide more detail.

Thank you, Council uh president.

Um and uh council member Palmer.

Uh that really addresses uh uh providing more uh services in the parks and then uh high on that priority is keeping our restrooms open to the public.

And that's uh we we hear feedback from council that that is something we need to prioritize uh and uh that that would accomplish that as well as uh providing uh more access to other areas as well.

So how does that correlate with your your two CSOs?

Aren't they supposed to be closing your your your restrooms at the night?

And is is that was my understanding?

Well, there's a lot of cleaning and and other maintenance that goes along with that.

Having them locked uh just isn't effective, and uh we need more people to rotate around to be able to accomplish that.

The CSOs are not cleaning or maintaining and we would also be working with the COs uh to do the unlocking so this group here would be daily going around at different times to clean up and make sure the park park uh shelters are clean, and then the CSOs, I'm assuming are going to be closing, or someone's gonna be closing them at night so they don't get destructed, and then they either automatically open or something's going around in the morning opening them.

Am I figuring that out?

Uh that that is correct.

And and uh we would also provide the service of making sure that when we have a shelter reservation that that is clean, ready to go for the event that the uh participant has paid for.

Okay, right.

That's helpful.

Thank you.

Right.

I'm gonna go back to the um uh arborist position.

I think we have six arborists right now.

I'm assuming the arborists aren't aren't um trimming the trees, but they're doing um the the laborers are.

Is that my assumption?

Uh the arborists are do a variety of different things, including including maintaining the tree cam canopy with their labor, but they're also making sure to assess the trees and try to get them on the list of which ones are the most important priority, et cetera.

Making they also are selecting different types of trees that need to go into the system so we don't get all the same type of tree and all of the same type of diseased tree at any one time.

If you have more detailed questions for today, Mr.

Woodman could come up, or we could get you more detail about what the arborists do for a follow-up study session.

I would just think if you had six of them, that would be enough to take care of that, and you could hire laborers to trim and take out dead trees.

I mean it doesn't take an arborist to know it's a dead tree.

I think it may take an arborist to know what kind of disease or what kind of issue the tree has, but it we have typically had six arborists for uh 55 square mile city that requires boulevard trees at every new development and has a significant number of boulevard trees.

I don't know off the top of my head how many thousands of boulevard trees that we have.

Okay.

But it's 32,000 for your snow plowing management system.

Why why don't they just absorb that into their program now?

I mean, you should have a surplus from last year.

Um you know, and we we bought them a new snow plow because of the surplus we had because a lack of snow.

So those are one-time surplus, and so this would be an ongoing cost within the operating budget, so you wouldn't be able to fund it with a one-time surplus forever.

You would get to be able to fund whatever amount you could fund from that one time, and then we would be coming to ask you to include that in the operating budget.

So that would be something every every year we're gonna spend $32,000 on software to see how we plow our roads.

Is that it's software to make sure that we're plowing as efficiently as possible and potentially rebalancing the snow routes, et cetera.

But we've done that for 20 years without it.

I mean correct.

We've done that without this software for however long we haven't had the software, which I assume is forever.

So would you assume that there would be a savings then and in the I don't know if there would be a savings, but I think that you'd have a more efficient system and perhaps it would show that you don't need to add more people in the future if you're able to be more efficient with your routes or if there's areas that we're seeing that we're having significant problems, you might want to rebalance how you're doing sanding, salting.

Um maybe you want to uh purchase different type of equipment in order to be more efficient in a certain part of town where you're seeing challenges.

So then under under reclass transit project manager to transit operations manager, how how does that affect the services our community's getting you are doesn't necessarily affect the services that the community is getting, but if a lot of these happen throughout the year as we look at the the um different skill sets and expectations that we have for positions that are pointed in a certain way, and as we add different duties to different people's jobs, for example, if we add the duties to somebody's job at the park maintenance facility or the maintenance service center to also be the facilities manager, and that's not part of their job description, we would probably be reclassing that position because we have to remain balanced within our system of um our classification system and with our um sorry I'm hearing a lot of noise.

Um and across our labor management system.

But that doesn't come out of our levy.

This does not come out of the levy.

This is funded through your transit system.

Thank you.

Mr.

King.

Yeah, I mean I learned a lot from the presentation, but this this questioning has been helpful to some things I wasn't picking up on.

Uh a couple uh things I was trying to understand.

I see the transformational capital reclassification of a DMC, and I'm trying to understand this as a decision packet.

This is costing some money to move up uh change the position because it's probably moving up a class, or what makes that a decision pack versus a management decision.

I've received like 20 of these throughout the last year, and so I'm trying to make sure that we aren't drastically altering your budget without going to the city.

No, no, this is this is this is what I'm trying to get to.

Like is FTE the control point, the communication between the staff and the and the council and far as what is allowed within a budget, or is there a lot of people?

FTE is your charter control point, and I am your, I think you need to know about some of these changes because if you had 20 of these changes, they would add up to 100,000.

Yeah.

Um okay, that that's what I again.

I'm trying to get that, like you say, the charter control point is the FTEs, but again, the difference between what makes it a decision pack versus a management discussion.

And and I think you put it together on this next chart where you show the dollar impact and how it adds up to the 1.54% impact to the to the levy.

Is that is that a correct way of reading it?

That is a correct way of reading it.

Okay.

Then I did want to make a couple other comments here just on the library thing.

I I find this to be penny wise pound foolish to have a nine million dollar library and then save money by closing it from the residents for some days.

I I just don't think it's a good policy.

So I would not support you know the the closing the hours.

I thought the Sunday thing has proven to be very helpful uh for residents who couldn't get to the library at the time.

So I I would not support uh those kinds of changes.

Um just on this thing with it being levy funding, it is interesting though that there are other impacts down there and below that are non-levy.

But I I guess I would make the point that there are other non-levee spending and non-levy decisions going on that don't make this chart.

Is that accurate?

Because there's things that's accurate.

Anything that's Rochester Public Utilities does not make this chart.

Yep.

Okay.

Thank you.

Mr.

Fredericks.

Thank you.

Um I support keeping the levy levy as low as possible without sacrificing safety of our community.

With that said, I'd like to see the use of contracted workers wherever possible.

With benefits with benefits being 45,000 per year for full-time employee and an additional two to 25k depending on the position.

I just think it's wise to utilize those services where possible, whether it be building maintenance, landscaping, cleaning work, what have you.

I know you know the scope of work that we could entertain that doing that in.

I think it just makes sense because there's peak times for these things.

There's and when it's not a peak time, you're carrying that full-time employee all year round.

You know, if say you get caught up in a certain area, whatever, then you're for lack of a better word, stuck with an employee and we're paying them, you know, a lot of money when it when you break it down, the wage might not be huge, but when you throw the benefits and everything, I think every full-time employee is over a six-figure position.

So it's just important to be conscious of that.

And you and I I like the idea of supporting our private enterprises in this community.

Uh they they like to have the work and they can do a good job, and you know, it can uh help them grow their businesses and provide jobs within their business.

Like we don't have to manage and and operate.

So that's what I got.

Thanks.

Any others?

Please proceed.

Thank you.

And I would just maybe add that we do take take a look at that on whether something maybe should be contracted or a position, and that's some part of the l nexus of analysis that we do in all of these.

Um and sometimes when we contract, we also have the benefit of needing the contractor to meet the letter of the contract, and that does not always work out for us.

Um so strategic priorities for 2027.

Again, you will have another look at this in 2027, but we ask the departments to look at the two-year window of planning.

Um so in 2027, um, we are looking at two community service um police officers.

These are police officers, not CSOs, but in the community service division um to focus on that homeless outreach.

Um GIS technician for fire police, emergency management, and parks.

Um, again, this is somewhat related to emergency management response.

So the concept of housing access is we want to make sure that if something's happening that people can um access um the housing that they have uh and have quick recovery uh custodial position for the parks and forestry facility again, you could look at contracting that, but we have not always had great success with doing those things.

Um, it's a significant facility, and if it's not um, and and those have not been inexpensive contracts either.

Um, two transit attendants again.

This is not in the general fund, but transit attendance um added because of the expansion of the system.

Um, another arborist position that would bring you to eight.

Um, and then uh so you you if you approve these this year, you still have the opportunity to look at them in 2027.

Um reclass of a manager of facilities and properties again to a director.

Um we've continued to grow the central service of facilities management to equipment operators for the sewer utility.

We've not added equipment operators for the sewer utility in at least a decade, and it has continued to grow and expand.

Um a pickup truck for the sewer utility because they'll need to get to the different um parts of their job.

Uh facilities and again, those are not funded in the general fund.

A facilities vehicle request, so that's the second facilities vehicle for centralized facilities.

Um the uh implementation of the enterprise resource um uh software system will require some additional staffing in order to be able to keep using the existing system, processing everything, and um build out the new system.

Um, and then in the foundational principles, we have two IT system support specialists.

Um we do more and more and more and more things online at all hours of the day to be able to meet that 24-7 support that we only just started working on last year, um, uh adjusting a smart sheet digital asset management tool so that we can have multiple people pulling um uh visual assets um in a functional way, and then a police squad car and equipment which is related to the positions.

Mr.

Doring.

I appreciate the uh the inclusion of the two community service police officers for homeless outreach.

I'm just wondering why not the inclusion of uh full-time social worker instead of uh or in lieu of uh officer.

So I'm kind of wondering if the chief could talk talk about that.

He is coming forward, so the answer is yes.

I I'd appreciate that.

Just because the the social worker involved now is doing amazing work.

So that's the only reason I'm asking.

Yeah, uh, thank you, council member, for the question.

Uh and and I appreciate the acknowledgement that she is doing amazing work.

Um, and I believe that uh we hope that we continue on that path as evidenced by the report that we provided you.

We are seeing some short-term success.

I think the short answer to that question is it quite may be a 2027 ask.

We're still in the pilot project phase of working with this embedded social worker right alongside.

We are seeing short-term success.

I hope that it's long-term success.

And then also I think part of that conversation is uh I'm not sure how long this particular person that we have in this position uh desires to can wishes to work and continues to work, and if it's not her, uh I think uh some of the success we're seeing is quite frankly reflective of the person in that position right now.

So we're still evaluating that.

Um we have uh some funding to continue this pilot project probably through 2026, and so we're still evaluating that pilot project uh right now, and I hope to have more data for you guys.

Mr.

Fredericks.

Thank you, Mr.

Wall.

You're welcome, Mr.

Fredericks.

Um it goes without saying, but I I I feel like I have to state the obvious to go back to what we said we were talking about.

The let's just talk about for uh I call it forestry management, but uh the arborist position and such.

Okay, you hire three more.

Do we have the equipment for all those people?

Do we have everything we need?

We have vehicles, or now are we gonna have to get more vehicles, more equipment, more this, more that it isn't just the cost of the of the of the man, the man hours, it's all the stuff it takes to run that too.

Then there's the maintenance of all that stuff and the ripple effect of things like that.

You know, I'm sure I have a lot of faith in Mr.

Woodman.

I'm sure he's thought these things through, but I just know what it costs to do things like this and in the maintenance and and vehicles and all that too that go with it, it's enormous.

Uh council member, council president.

Um, just looking at the cost that's reflected here, it does not appear that there is a vehicle that would be using existing equipment.

So you said I should read better.

No, I had to go to the slide to see what the number said to feel confident that I was answering it accurately.

Mr.

Keene.

Um yes, uh I want to just go back to this discussion that uh Chief Franklin had with Councilmember Doring.

I I I too am well aware of uh some of the work that goes on there, but I I want to clarify that I believe the social workers embedded with our police department are Olmsted County employees that were trained doing some training that as opposed to city employees that are now social workers within the police department.

So we have that program where there's the co-response, but with the public safety one-time funding, you added a contractual arrangement with it happens to be a person that's retired from Olmstead County.

Yeah, um that is embedded in the police department.

And so that's the pilot that Chief Franklin is referencing.

There still is the co-response that happens and the umstead county um social work employees that go out when we report, say an encampment or something of that nature.

But this is this is a pilot that is funded through the public safety one-time dollars that Chief Franklin's referencing and the uh Councilmember Doring was talking to.

I guess I'll just this is a budget meeting, and it's not really a budget questionnaire, but I just want to make sure as we you know when you're having pilots, you do one thing, but when you start talking about we're going to change how we do our staffing, I I want to make sure I'm aware of what's happening there.

That if our police department has sworn officers and has some admin, and then it has a like a uh a department of social.

I I've got to get comfortable with that, and I I'm not there right now.

And right now it's one contractual employee.

One contractual.

Okay.

Uh again, just wanted to clearly get it out there.

Thank you.

Mr.

Miller.

Yeah, thank you.

Uh again, like classifying these.

I I appreciate Mr.

Fredericks bringing up the point of the cost of growth, how we grow, and I think a lot of these are inclusive growth management.

We're we're facing the pressure of a growing physical footprint of our city.

Um and I I look forward to some of the action plan work uh specifically to understand the cost of growth over the long term.

I know Mr.

Palmer has brought this up of well, you know, street uh property taxes pay for the street and the maintenance, but there are other factors beyond that.

So appreciate the opportunity to engage on this.

Uh I think the GIS technician is great, particularly as we've looked at how do we um understand our our parks and trails connections.

Um and I've heard that staff time is such a limiting factor on understanding where those gaps are.

So would look to I hope we can do that before 2027 in closing that plan.

Um additionally, I'll just echo the comments of Councilmember Doring.

I would I've also heard the great success of uh the social worker about it.

I I would love for us to figure out how to act sooner and even expand upon that success.

Um whether that's through one-time funding, right?

But I think that's great, and I would love for us to build on that success and and understand the the sort of ceiling of of what investing in that area looks like.

And then finally, I'll just reiterate again.

I think beyond the arborist, these aren't really responsible environmental stewardship items, and I would love to see them just move to growth management because I I think that's more reflective of what they are providing city services for equipment, uh, operators for the sewer utility for a pickup truck, and then um facilities and properties.

Mr.

Palmer I need a clarification.

Uh um the 2026 budget, doesn't that have two people part-time to to be with the police department during the day of homeless?

Those are community service officers, which will do more than just focus on parks, but it will provide additional capacity to also address some of the parks challenges.

There's also a somewhere up here.

Uh no, I've lost it.

Seasonal part-time.

Oh, park CSO is seasonal.

Um, so that there's some seasonal capacity there.

So I think most of the seasonal capacity is what will be focused on parks, but there will likely be times where the community service officers, the full-time community service officers might be necessary as we're seeing trends develop in order to be able to influence those trends.

Um this position, these positions are these two positions and the seasonals are not sworn police officers.

Right.

They're community service officers.

These two positions are sworn police officers focused on the community outreach division that is primarily downtown, but a wide wide swap kind of wide swap of the downtown area and that community service outreach officer program that we have.

That we currently have the one person that's retired from Olmseet County during the day.

Right, but this is just the police officers.

We have, I don't know how many officers I can't recall, are in that unit.

Okay.

I I know we got a grant for that one before.

And I'm I support it and I've heard great things.

I agree with everybody else on this, but but where do you get to the spot that that this is Olmstead County's responsibility and how do they not fund this?

Or the state not fund this.

I can't answer that question.

Could I you might want to talk to Olmstead County?

I mean, I I think Old Tack County has a lot of challenges that they're trying to address, right?

They provide supportive services to a wide demographic of the community, not just people experiencing homelessness.

And so they also are used to providing those services to a large demographic of people that aren't just people experiencing homelessness.

So it's something that the county might need to look at.

They also don't do the same type of policing that we do.

If your sheriff's deputy, I mean, they do the similar type of policing, but they're around the entire county.

That's a really different experience than a police officer working in a city of 125,000 people, which is the majority of the population of all of Olmstead County and has a densely populated downtown during the daytime.

Um it's a different, I think they probably experience their role within people experiencing homelessness differently than the city that's providing a park system that provides a library that provides police and fire service in a more urban setting.

So that's a different mindset potentially than our Chief Franklin, who's got the calls for service at the at the dispatch center and has the information that shows how many times we're contacting the same people for pretty significant behavioral challenges.

And I understand that in the state of Minnesota gives the county a lot of money to do all the social services that they they do.

We don't get social service money from the state of Minnesota, correct?

Correct.

And and so it's it's and I'm not trying to get rid of that position because I think it's really important.

I think that having somebody in social services talking to somebody other than a badge, so one other person talking to them might be helpful.

I'm I'm I'm fully in support of that.

I just don't want to be the one that I use the overnight shelter.

85% of the funding, I believe, is from the state.

Not from the county, but from the state, and then we kick in some money.

So I don't want to be doing funding that the county should be doing.

And yes, we can talk to the county commissioners, but I think we'd have to have some kind of a group talk to them because at some point they need to do a better job, in my opinion.

Thank you.

Thank you.

So, based on a conversation that uh we had uh a couple of months ago and before this came out, I thought that perhaps the 2026 decision packages would be about fireworks and music and uh libraries, some of those things, and the list uh changed to be uh considerably uh more uh um important, I think, to uh the causes of the city.

Then I look forward to 2027, and uh with a rapid rate of change uh in our world and our city, uh how much of this do you really believe is is going to be the ask for 2027?

I think all of this will end up in 2027.

The question is do people say they actually are concerned that they don't have the capacity without adding more?

And perhaps some of these would get pushed out to the future, but uh it's very hard to put it is difficult to predict two years into the future, but it's an important planning tool so that you can see okay, if this is what was requested in 2026 and 2027, but then in 2027, something completely different comes forward from a department.

Are we planning ahead enough?

Um we also consistently hear from this dais, not necessarily this specific council, um, concerns about making sure that the property tax levy doesn't go up more than is necessary.

We heard that today.

And so that's the dynamic tension that we have within trying to provide services and do so in a cost-effective manner so that people can afford to live here.

And that is not an easy lift.

So going through the decision packages every year, even combing through all of the baseline budget to say, okay, we haven't really been using this, we can either take it out or apply it somewhere else.

There's a whole part of this that you don't use the word have to see because it's painful, um, where folks are really looking closely at all of their ongoing operating budgets to say, do we really is this still really an effect effective use of these funds, or are we actually finding that we're doing things differently now?

So there's that whole baseline process that happens, and then you layer up to the decision packages that are reflecting new challenges that we're facing of either capacity changes of how we're doing our work, a lot of that being online and with software, um, or changes how people are experiencing the community.

Um we did, I would say make a lot of progress in being able to meet the current challenges with the bold forward unbound teammates.

And I think you also have some capacity within there, granted, it will mean a shift of revenue to fund those where it's possible that those will iterate into something else as future requests.

But right now we're in the building phase.

A lot of the things that you're seeing being built are not even going to be done in 2027 because it takes a long time to deliver them.

So I would say that it's also a reflection of the the team understanding that there's gonna be discussion at the city council of you know what is reasonable, acceptable, politically acceptable from the tax levy perspective or the cost of service for utilities, and trying to be efficient and effective and really reflect what their needs are.

One of the headlines that I think the community uh needs to hear, and uh has been reflective and reflected in our written uh communications is the hard work the staff has done to uh reduce the budget by four million.

Uh that they really did do very good work to get it from that 11 point something from the 10.69 down to uh the 5.9 um because I think it's not infrequently that we get uh missives from uh residents that say, well, don't they ever cut anything?

Uh don't they ever review programs?

And and I really appreciate what uh the staff has done uh in order to uh reduce items that allow us then to more uh strategically grow in ways that will uh serve the citizens of Rochester.

So thank you.

Thank you.

And we do this every year, we just were really really focused on not being at 11%.

Um so it maybe the adage would be like we reuse recycle and then reduce in local government because there's almost always something new coming that people have expectations for.

So it's not necessarily that we're always reducing, but we're mitigating that increase by looking at how we're funding things and how we're providing services and trying to consider that at the baseline level, and then we're asking for additional when we think it's necessary for the service to operate well.

Other questions before we move on.

Oh, Mr.

Palmer.

So so we always have uh if somebody says to me we want to um cut the budget, I always tell them that about one percent of the budget's about eight hundred thousand dollars.

Is that the proper number or is that gone up higher?

I think it's about eight hundred and fifty thousand.

I'm a rounder, so let's say it's nine hundred thousand.

Sure.

It's not, I don't think I think it's like eight hundred and six.

Oh no, it's more than that now.

It's it's more like one point.

Yeah, yeah, it's closer to a million.

Rachel's gonna get the exact number here.

Over a million.

Yes.

It's over a million, sorry.

Well, if our if our tax levy is one 118, it would have to be a million dollars.

Oh, 1.1, yeah.

Yeah.

1.1.2 almost.

1.2 million dollars.

Okay.

And so if I want to go down to 4.8, and some of the suggestions I've made would probably get us down to 4.8.

Uh I'm asking I I haven't you need to give me more suggestions to get there.

But um, and I can I'm not laughing about it, but we did have council members who said there's waste and fraud or whatever in government, and then you figure it out.

I don't, I'm not that person that wants to do that.

I think that if if we can make some hard decisions and four of us can say, yes, this is what we want to do, that makes sense.

And so I appreciate the hard work that's gone into this, and and I don't think that we have waste in our city government.

Um, I think it's pretty well run.

Um, and so you know, we have a lot of things we do 24 hours, seven days a week all the time.

And so um that's you know, so it's just it's not an easy business.

That's why we love it.

Thank you.

Proceed.

So we mentioned employee services being a lot of the cost of government, and this slide shows you um that is true, and it's still true.

And when you think about the 24-7 service, the cost that it and some of this does reflect of decision packages for CSOs um and uh in in police, but the lion's share of the increase of your um employee services is in police, buyer, and public works.

Those are 24-7 services that happen in the city of Rochester that are funded primarily with property tax dollars.

You can see that joint facilities is centralizing, so we've had them centralized, but we had been hadn't like centralized the cost of their budget until this year.

So it's not a 1.1 million dollar increase.

There's those decision packages are in there, but it's removing them from some of these other departments like the library, um, city hall maintenance and the PWTOC and centralizing them in one place.

Um the same for uh 311.

So that used to be picked up in city administration.

I didn't cut the budget, 396,000.

Um big part of that was moving um uh 311 into it and housing it in its own um space so that communications engagement and 311 is all all in one place there now.

Um so we can better track um the cost of those services.

Um but yeah, the cost of employees and providing that service to council member Frederick's point isn't insignificant.

So we do look at contracting things out when we can, especially if it's something that there is a quality vendor that can do that.

Um we now contract out the civic center, for example.

We've done the opposite direction when some and saved mil a million dollars when the DMC project managers went from being a bunch of funding of contracts to employees paid for also still by DMC that year, the cost of that service went down a million dollars.

So it sort of depends on the service and the contract and whether or not and different points in time, whether it makes more sense to contract out or to hire.

We have a position in public works that's like perpetually impossible to fill, and they think we should contract that out, partially because we cannot get applicants to apply for that job.

So that wasn't really a cost perspective, it's that we need the work to get done, and we're not we're not getting candidates for the job.

Um, but we still have to do the work.

Checking in with uh the council and with the presenter, we've been at this for 90 minutes, a bit more than halfway through the slides.

Do you want to forge ahead or do you want to take a break?

I could do budget all day.

I took a break.

Um this is a forge ahead.

But I do have a question.

Yep.

In in talking to um um one of the electrical inspectors, I ran into him on the street, and when he got hired, there were 60 people who applied for his job.

And the last time we had electrical inspector job that came up, I think five people applied for the job.

We're we're how do we balance that out that that people don't seem to want to either work for the city, is it the wages that's not there?

Why are we not attracting enough applicants?

It's a combination of things.

I think in that case, we've found that wage was a concern, and they're the when the state changes how much they're paying, and it's five dollars more than hour than we are, then we have things to think about.

Um, also one of the challenges that we have with our labor contracts is it's not always the same types of positions that are in the state labor unit.

Um, so that's why you see we have the um uh cost of living adjustment and in some cases merit or step adjustment, but we also sometimes have market adjustments.

Um so if the market is dictating in a certain job category that we need to pay more in order to be able to provide that service, sometimes we have to make that adjustment and it shows up in your personnel line.

And so when you make a market adjustment in and if I remember right, I'm gonna get me um tell me I'm wrong, but we have a list of all the jobs, they're all plotted out.

And if we give a market adjustment here, how does that affect the other jobs?

The market adjustment is really specifically related to marketability of that type of job.

So, for example, last year there was a five dollar an hour market adjustment for police officers and other um like things and police sergeants, et cetera.

Um, that was not something that was provided to other positions within other labor contracts because they're not police officers.

It comes up during negotiations, um, but that isn't the market that that that some other employees end.

So, for example, I'm not a police officer, so five dollar an hour market adjustment for me isn't is is not the same thing.

I I don't have a licensed carry, I'm not post-certified.

I can't do the same things that a police officer can do.

Thank you.

I can, I just use my de-escalation skills.

Um one more I'm going back to one of your original uh one of your original slides.

In in Mr.

Palmer.

Yes, even though he's not here, Mr.

Schuebring is counting your question.

That's good.

Um I'm using his time.

He said I could have it.

Um residential um of the tax levy went up four percent for residential and hotels or apartments, only went up 0.5.

Is that a state thing?

Is that why you how does that point?

That's based on how a properties assessed.

So it could be that they haven't in that period of time had a significant amount of adjustment to their assessed valuation.

Maybe they aren't on that cycle of assessed valuation.

We know that's part of what happened with the commercial, was they had a backlog of reassessment.

Um that happened this year, so a number of commercial properties are seeing pretty large increases in their assessed valuation.

Um it could be that as though new apartments are built, they've been assessed properly, and they aren't adjusting yet and appreciating in value beyond what their prior assessment was.

Um it's really going to be completely dependent on what's happening within the marketplace.

We've seen some apartments sell for quite a lot, um, apartment complexes.

So I would think that you might start to see some of that adjustment considering um a lot of the change in uh market value is going to be based on recent sales.

And I see commercial went down, but go back to apartments.

I mean, that's surprising that commercial went down in but but apartments.

How much of does the TIFF on that affect that?

We could get you those details, but that that could be that would be a component of new construction and the tax increment financing for some apartments, but we've had some apartments that will be coming online.

Um, and for example, there's one near Soldiers Field that I don't believe has its certificate of occupancy yet, and so you won't see that hit that category until it's actually got its certificate of occupancy and starts paying in as an apartment versus something that's under construction.

And is it typically two years behind?

I would have to call my friend for that.

Thank you.

Mr.

Miller.

Mr.

Palmer asked my question, so thank you.

Mind mill to happen.

That was a cost savings right there.

Uh 11.2 million dollars increase for all funds, including RPU for teammate expenses.

You can see in the general funds, um, heavy heavy levy funded fund.

Um, of that 5.4 million, uh, 3 million is for police and fire.

So um those are cost of service that we absorb for 24-7 service.

Um library um is uh $300,000 increase, and municipal recreation department is $700,000 increase um for uh teammate costs.

Um Rochester Public Utilities, $3.6 million uh for electric and water, and then other funds, so um stormwater, um flood can well I'm now I'm really stretching stormwater, what wastewater, park parking, um, transit, all of those other non-general fund funds um are sitting at a 1.2 million dollar increase.

Mr.

Miller.

So question about this, uh, because I've had a series of conversations over months in the community where people tell me their top two issues are the tax levy and speeding or running a stop sign or running a red light.

And I see that police is another increase here, which people are generally supportive of.

Are there tax are traffic enforcement um additions to some of these services and and these increases?

Uh that really depends on how the um entire 150 police officers are deployed.

It's a question for two.

But in the 2026 budget thing, there's not like a transit task force in the traffic, uh, traffic enforcement.

Traffic tasks, there's not a traffic enforcement task force.

We don't operate that way.

Yeah, council member.

Um the budget increase is more reflective of that um cost of living increase or one-time increase is is what you're seeing there, I believe.

I can I can answer that question from an operational perspective, from an operational perspective.

We take a look at our staffing on a daily basis, and if we have enough staffing above and beyond what we feel we need for the calls for service or the anticipated calls for service, we actually do designate a car to go out there and do traffic enforcement.

It's not a desig designated unit as uh as City Administrator Zellms has said, but it's more of an ancillary assignment when staffing uh levels allow uh in the same vein, though I do want to know that um I see I hear from all of you quite frequently and other people in the city about speeding concerns, and so that it is a priority of ours that we try to allocate resources and additional equipment like the speed trailer and things like that to different locations in working with our partners in the city for maybe um uh speed uh mediation um uh techniques as well, like speed dumps and things like that.

So uh we take a comprehensive look at that, but no dedicated unit.

Okay.

I've worked in a city that had a dedicated unit.

It was 11 officers looking at this.

You'd be talking about millions of dollars, which you could do, but that would be I think legislative action be great to allow automated enforcement.

So yeah, we'll lots of different ways to think about it.

So I was wrong.

19 bargaining units, eight labor contracts, not nine labor contracts being renegotiated.

Congratulations, HR, only eight.

Um, so we haven't uh resolved any of those for um the current round of bargaining.

Um we are carrying some projections there.

Um again, salaries net increase 7.1 percent.

That's not like people get 7.1 percent across the board.

We have I don't know how many wage grids across all of our different labor units, and they're all slightly different.

If you hit a certain you know years of service in police, you get double step, though things like that.

It really is based on experience, et cetera, depending on the type of job.

I would say health and dental is a fairly positive story.

Having an 8% and 1.5% adjustment for health and dental actually is pretty low for a city.

We are taking a look at some of those, and we're always trying to control those costs where we can, but they're part of again part of our bargaining.

This is a slide you've seen three times.

Uh well, twice.

Now it's the third time.

Um, so again, um, there was a request from the outside agencies for a 21% increase across, you know, not across the board, but um varied depending on the entity tried to be judicious and apply some of those same considerations uh that we did for uh other city services and made some adjustments in different areas that seemed to align with needs across the community.

And if you have any changes to this that you are interested in, we should talk about that soon, sooner than later.

Well, nice that you said that.

I do.

Um community building fund.

I see we only have 50.

I would like to see us go to 100 with that, and then limit the top amount would be 10 grand.

Um, we're now I think our top amount for the big ones is 20 if we knock that down to 10.

But I could see I think that's a really good program and helps on a lot of different um grant polices, and our staff do a really good job of working with the smaller grant people to help out the little things, and so I would be in favor of increasing that um to a hundred thousand dollars.

We can put on that on a list to talk about at your future study session.

Well, everybody's shaking, yes.

So we'll just make sure they get to say it twice.

We have a person that's not here.

Yes, just want to show you what it does to the budget.

You know, you have a sense, it's like 0.002 percent.

Yes.

Um that was quick math, it could be completely wrong.

Um, so that equates to a 5% increase in 2026.

Again, not across the board.

Um, really, just like the rest of the budget, we're looking at um each service and entity for what it is and not just um we don't just apply a cost of living across every line item in the city, um, and then 3% in 2027.

This is what they do.

Uh, expenditure categories.

We always like to throw this on here because it says other and miscellaneous, and then I have to have a cheat sheet to tell you what that means.

Um, so if you look at 2025, the currently adopted budget that we're operating in right now, you'll see that capital improvement plan and and 2026 and 2027.

There's always vacillation in that because we don't do the same project over and over again.

Um, each project is different.

We have some pretty significant projects coming up.

Um, some of those are happening right now in 2025.

Um, you can see changes in other charges is comprised of judgments and penalties and settlements.

Um, contribute.

Oh, wait, nope that's the revenue one.

I don't know what it is.

Other these are expenses, other charges.

So these are going to be things like if you have some professional services or contractual services, things of that nature.

Um, miscellaneous keeps going down.

I would need to phone a front to understand the miscellaneous because I didn't print that out.

Um, employee services though, um, is it goes up by about three percent a year?

Um, and that's a relationship of it costs of employees typically never goes down unless you're reducing the number of employees and changing your service level.

Uh, contractual services, again, that's more um contractual versus professional services, things of that nature.

Um, and you can see that these are pretty much in alignment with one another.

There's some um slight changes, debt service changes um are going to be happening with the RPU plan, and also your care you're taking on some debt service for the maintenance service facility.

There's also debt that's falling off.

So a little bit more detail here.

General fund the adopted um budget in 2025 was 126 million.

The adopted budget in 2026, well, the recommended budget in 2026.

There's a little Freudian slip there.

Uh, wishful thinking, 137 million.

Um, and so core government services are covered here, some key operational and financial factors.

So this is influenced by that 0.44% for paid family medical leave, um, things of that nature.

Um, departments um in this area really worked hard to optimize the budget.

This is where a lot of those changes happened, um, also in parks and library, and then um towards the end of this year.

Um, we will give you updated financial and accounting policies.

So we will have those all in one place for the first time ever.

Uh, and so we have done all of this in order to try to maintain financial sustainability while still investing in important uh priorities.

Again, where does the money come from for the general fund?

$137 million in the general fund.

Vast majority of that is coming from the tax levy.

But there are other types of revenue.

This is where my other and miscellaneous services is for.

Some tax and licenses and other charges that are there, and then licenses and permits is also not a small amount.

That's mostly going to be funding your community development department.

Our fund balance is important.

We do not collect revenue and spend expenses on an equal basis every two weeks.

And the lion's share of our revenue comes in twice a year.

That is the local government aid and the property tax payments.

So we need to be able to carry all of those costs throughout the year.

And we have a 42% floor that we should not go below in order to be fiscally prudent and be able to cash flow.

We have increased somewhat over the last few years.

So we're sitting at that 48%.

This is not a recommendation to go on a spending party.

But a good story to tell.

There are some cities that are anywhere near their five months of cash flow.

Special revenue funds.

We are now entering special revenue funds.

So this is uh accounting practice that we use for any revenue that is specific and tied specifically to the expenses that it can be expended for.

So thinking about library and parks, a lot of that is property tax, but it's held within the revenue fund once that has been approved by this body.

The governing bodies of those charter boards are approving the expenses related to that.

So the 2025 adopted for uh parks and recreation was sitting just over 16 million, and the recommended is just over um 17.3 million.

Um, so additional accelerated investment happening with the park-related funding.

We have that um dedicated two million dollars of market value for um parks projects.

Um again, the additional Arborist position in 2026 combination of PD and so seasonal support to activate the maintenance of picnic shelters and restroom facilities, um improve the experience there, some staffing adjustments for Silver Lake Pool being open next year, and some increased um seasonal hours for um city supported events and activities.

The library also special revenue fund, so increasing by about 550,000 this year.

Um, the lion's share of that is going to be um the decision package for those four full-time entry-level positions.

Um we do not include a decrease in temporary salaries in this projection, but could um that was one of the things that was discussed, and we can talk about that at a future meeting and really understand how much support there is to close on a Sunday or Monday.

Uh one-time charge of 42,000 um for a new library vehicle.

Um, so sometimes we have shared vehicles that have ended their useful life in another location, and they migrate over to another department and they become part of the operation, and then we've never set aside funding to replace them.

Um, one of the challenges with the vehicle replacement fund that we are overcoming with the structural changes that we're making to that.

Um, and then more building um improvements to align with the rising costs of maintaining that building.

Um, that's not like a million dollar increase, obviously, they're only increasing 546,000 on a budget of uh 10 million, and then some contractual costs for um technology and software, those just continue to rise and the utilization continues to increase.

Uh special revenue fund of the airport, um, increasing about 605,000, vast majority of that is going to be funded with revenue increases that our airport generated.

Um there is a small baseline increase, utilities, contractual services, things of that nature, and um there's a significant number of capital projects that are carried in this budget that we know we're getting federal funding for, and then others that we're going to ask for federal or state funding for.

It's really important to have it in your CIP in order that they know that you're prepared to utilize the dollars if they are to come to the city.

Um, I'd say this is pretty lean budget for an international airport.

They do a great job.

Mr.

King.

Um I am familiar with the concepts of the special revenue things and then the enterprise funds, which are slightly different.

Uh, I guess I might not have noticed that transit is a special revenue versus an enterprise fund.

Can you talk through why you would use one versus the other?

I would say um they don't charge they most of the revenue that's coming into the transit fund is not a charge for service.

Um it's dollars that we're receiving from the state.

And if I could, is that the test?

Is that that's really the test, whether it's a special revenue or yeah.

If you have a significant amount of funding that's restricted based on the revenue source, then it's going to be a special revenue fund, even though it might operate it operates similarly to an enterprise fund where the dollars stay within the fund.

Right, right.

I I think that that that's helpful.

That that's I guess we're gonna go through the enterprise ones next.

So and yes, transit is a special revenue fund.

Uh so small increase there for 2026 again, I think rapid transit, not opening really until 27.

We'll be doing some commissioning and um finishing the project in 2026, um, looking at the paratransit program and um continue to evaluate how to better um serve uh those customers and then some capital projects um forthcoming.

We always are buying buses here, um, the bus stop uh improvements and then the North Broadway park and ride, which is almost entirely funded by state um funding and a federal grant.

Enterprise funds, self-supporting government funds.

They operate more like a business, so there are a lot of charges for service related to these.

Sometimes they will have grant funds, things of that nature.

Um, but realistically, they're operating as a business with charges for service um supporting the line, the vast majority, if not all of their um of their expenses.

So an increase of about 780,000 uh in the parking enterprise.

Um again, they've got those regularly scheduled um restoration projects.

Two of those will be coming in 2026, the ones that are happening now, hopefully we'll be done on time and on schedule.

Um the uh continued implementation of that rate study, uh doing some maintenance to our service lots and then looking at metering and advertising, making sure people know we have lots of parking downtown free after five and on the weekends.

Um come join us.

And then um there is um some ramps six debt service that's impacting that fund.

Um it was part of a tax increment financing agreement, and the value of the property hasn't increased as much as we had anticipated when that went underway, so that's something we're keeping an eye on.

Uh wastewater fund, also an enterprise fund charges for service, the lion's share of those expenses, a difference uh year over year of about 3.5 million again.

There will be two positions there.

Um, but we have that large liquid and solids treatment um and water reclamation plant um upgrade happening.

Um that's anticipated through um early 2027 major overhaul 92 million dollars.

The debt is scheduled to be paid off in 2026 from some prior projects, then we'll um carry on some new um significant amount of um public finance authority dollars also coming into that project.

Um, and um the debt payment will actually be about half of the current.

So again, we're paying the debt, we're building up also some additional fund balance for future um investment in the facility and also in the collections of the system.

All the facility serves every property within the city of Rochester, and uh being able to get through a sewer line to get treatment capacity is a challenge in some parts of town.

Stormwater, uh again, um we are actually seeing a slight reduction in what we anticipate there.

There's a lot of capital projects or capital maintenance projects that happen within the stormwater enterprise fund.

We do charge um we do have a stormwater charge that is um included there.

Um people pay for that specifically.

We have some planned investments um and some retrofits um needed for some uh large redevelopment downtown and uh transitioning to implement the management plan that you heard about earlier this year.

Now you get to hear a different voice talking.

I would welcome Timakola.

Unless you have a question.

All right, Hillby.

Yeah, I put the question, maybe it's more of an observation, but in the enterprise fund part.

Thank you.

Enterprise fund for parking.

Um you may mention that it's you know self-funding, it's run like a business, but then what I my view is this group directed that enterprise fund to give away parking free on weekends and evenings.

How come we don't account for that?

I don't know how well I don't know how exactly you would account for it.

I I don't either, but I but it might take would be is we should because we spent money out of an enterprise fund by directing an enterprise to give something away, and we don't keep track of it.

It bothers me.

We could probably determine how many parkers there are evenings and weekends and determine what that would have been if you charge the same amount.

So it's really lost revenue.

So I'll just make the observation.

I don't know if my peers think this is silly, but I would like to monetize what it is that we're giving away and have a way of saying that's what we did because I looked, I sent some numbers.

People that I have votes on the city council back in 1996 where they quit doing that because it was too expensive.

And it's within our power to do it.

And I I'm not suggesting we do it, but I want to know what we did and if it's what it costs us.

So I I again I just one person's observation.

It's not something I want to do right now, but from a budgeting perspective, when we direct, I think we should know what we're costing.

Sure.

Thank you.

Thank you, Mr.

Wall.

I know we haven't uh got through this year's budget yet, but I'm I can live with a 5.9 for this year, but I do not support a 7.9 for next year, and this is a two-year budget, and we haven't talked about that at all.

So what you would be approving in December is the tax levy and the supportive projects for 26.

It's signaling something for 2027, so it's helpful to know that that's a concerning number for you for 2027.

Um, and it's something that, especially if there are new requests for 2027 supplemental budget that we know that not only were you not comfortable with the original projection, but that you would be even less comfortable with something different higher.

I'd probably be comfortable with something different that was lower.

I can vote and stomp my feet, right?

Uh you can you can stop your feet and not vote.

That's abstaining.

But um, yeah, so all of those things are important.

We're just really, and this is why we project it in part is so that the teammates that are putting together the requests have an understanding of what the concerns are.

Thank you.

Mr.

Palmer.

Yeah, I'm gonna go off Mr.

Keene since you brought it up.

My bug boo isn't so much the weekends, is it is um north, I'll give an example of the north lot by Mail Civic Training.

We gave that away for free.

The parking people are using it, they're gonna lose revenue.

I don't know how we acquired that, but but that to me is a parking fund.

That should get money back into the parking fund to make it whole for what they're losing.

And so I don't know if everybody agrees to that or not, but but I think from me from an accounting perspective, that makes more sense.

I don't know on the weekends if it's worth the effort to because I don't know how full the ramps would be in the weekends if if we charged.

Mr.

Miller.

Uh I appreciate Mr.

Keene bringing this up, but I I think it's relevant to the news that's been out about the library master plan recommendations, a pilot of two hours of free parking, which would obviously have costs.

So I would love to better understand the cost of providing an hour of free parking and free parking on the weekends.

Um we already track free exits, so it might require some assumptions of how much those exits are worth.

But I definitely think this is a live conversation in public uh about what it means to provide free parking, and we've talked about being transparent about when we subsidize.

Yeah, and in that scenario um specifically, I would believe that the library would end up needing to either increase their budget or change their budget and absorb the cost of their free parking.

And and I understand that I just bring that up as a tangible example of what I think Mr.

Keene is bringing up is what does it cost to provide free parking?

Um please proceed.

All right, thank you.

Oh, that's right.

I don't have to proceed.

Good evening, council members.

My name's Tim McCullough, general manager for Rochester Public Utilities.

Um presenting tonight on the uh two enterprise funds of RPU.

Actually, I should say three.

We operate three distinct enterprises within the RPU family, which would be water electric and the steam enterprise from the Silver Lake plants as well.

Um what you see tonight is representative of the budget that was presented in concept to the RPU board on August 5th.

Um it is our recommendation.

It's built upon the same action plan that you all have uh uh given direction to staff on.

In addition, at RPU, we talk about our five R's of level of service focused on reliability rates, responsibility, relationships, and reputation.

Um we do cost of service studies every three years.

The electric cost of service study was uh last done in 2003.

There's recommendations here as a result of that, as well as a water cost of service study that will be presented to the RPU board tomorrow night to be finalized and placed on file.

Um we've talked about the enterprise funds.

I just want to remind also the community.

Um we look in nature very similar to other electric utilities, but there's a distinct difference with RPU against an investor-owned utility that might be in other communities.

So there's no profit motive.

We charge only cost of service, and those cost of service studies are very important because they help us distribute the cost of providing the services to the community equitably amongst our rate classes and within the rate classes.

We group together like customers into rate classes, and we work very hard to maintain uh equity amongst those customers in charging only the necessary rates.

Um you'll see that we're entering into a uh forward phase of large capital investment across RPU and the RPU enterprises.

Um, and we have a long view of investments.

We we build assets that are on the 20, 30, 40 year life cycle and beyond.

We're still operating assets today that are well over a hundred years old.

The Lake Zumbro hydroelectric facilities a prime example of that.

Investments that were made over a century ago in this community that are still serving the community today.

Water utility is one of our smaller enterprises.

And there's really some large drivers here behind the rate recommendation.

We are seeing moderate to very low customer acquisition, customer growth, and the consumption per customer is relatively low.

So we're not seeing a lot of revenue growth opportunity through large increases of customers or large increases of consumption.

That's not necessarily a bad thing.

Conserving our products, both water and electricity, is a good thing for our community.

So when there is a need to raise revenues to pay costs, it comes through the form of rate changes.

There's an earlier conversation about what is a 1% levy change impact on the water utility.

1% is about $190,000 of additional revenue.

When we're dealing with capital investments in the scale of millions, it becomes a challenge then to raise the rate funded capital to accomplish those projects.

The also some major capital investments, particularly the advanced metering project.

This was a project that we've set out to build in 2023, and over the next two to three years, we'll have significant investments both in the water and the electric enterprise to the tune of about 16, 17 million dollars apiece.

If you look at our avenue annual revenue requirement of 19.5 million this year, taking on a 17 million dollar capital investment over a three-year period is a significant change there.

That is one of the drivers behind our rate trajectory that we're on.

We've actually already adjusted rates in 23 and 24, building cash, and we're cash funding the advanced metering project, but because of that spend down of cash reserves, we're also in a cash building phase in addition to some large capital investments elsewhere.

Just a point of talking point for you all.

About three, four years ago, we could assume that we could recoat, repaint those water storage devices to the tune of about $300,000 annually with inflationary pressures that we've seen a full recoding of a tower cost over $750,000 now.

And so that is just a cost of service that's loaded into our infrastructure, and we have to continue to maintain those storage devices.

It's key for water quality, it's key for the structural integrity of the towers.

Just an example, I think, of the cost pressures that we're facing across many aspects of the city, but specifically in the water utility and the water enterprise, that's an important thing to remember.

In addition to the advanced metering project, you'll recall back in January, we requested a budget amendment to launch the lead service line replacement program.

In 2026, I believe that is anticipated to be about a seven and a half million dollar expenditure.

Just want to note that that's all externally funded from grants, at least reimbursable from grants.

We are in a period of trying to manage cash balances where we're recommending short-term debt in the water utility to manage cash flows in the next two years.

The combination of the advanced metering project and needing to front the dollars in the lead service line project is putting us in a position of needing to take on some short-term debt.

Water enterprise is well suited for that.

We have no debt in the water enterprise today.

So we have the debt capacity for that and the future proceeds we expect from the grant funds on the water utility.

I think I already spoke to all my talking points here on this slide related to the fund balance.

Just call your attention to the bottom of 2026 recommended, and you can see the fund balance difference between starting and ending in 2026.

You'll see about a $7 million drawdown in cash reserves.

Maybe my mental math is a little bit off there.

But that is one of the issues driving the need for short-term debt there that will be coming back through reimbursements.

Switching over to the electric enterprise, if I would have been here a year ago communicating to you about our rate trajectory, I would have been reporting about a 2% annual rate need to develop revenues to support the enterprise.

Things have fundamentally shifted in the last 12 months in the electric sector.

We are recommending a 6%, 6% rate change.

That has an average customer impact of about $6 a month for a residential customer in the first year.

You'll see from the consumer growth, the consumption growth, we're not seeing any significant load growth in our jurisdiction.

Actually, our average use per customers has been a per customer has been on a downward trajectory for about 10 years, and that's with significant ads of new housing that we've seen over the last few years.

And so again, that creates a challenge.

We're not showing additional load growth.

Part of that is our strategy of conservation.

We invest significantly in conservation efforts, and over the last I think 15 years, we've avoided the need to build one and a half new power plants by those investments in conservation.

You'll see some significant investments in the electric enterprise and some fundamental shifts that we're seeing in the next five years.

Most notably, we are currently a member of SIMPA, the Southern Minnesota Municipal Power Agency.

And as a member of SIMPA, we also have obligation.

Our power supply costs are in excess of 100 million dollars a year this year.

You'll see in that top line cost of power.

But that's because the debt service on SURCO Unit 3 is retiring next year.

The mortgage is finally paid off on that coal plant.

It will continue to operate through the end of this decade.

We will continue to have a membership in SIMPA through the end of this decade.

But that wholesale relief, that debt service reduction that will come back to us.

Our intention and recommendation of the RPU board is to reserve that for future debt service.

We have our own capital investments that we are seeking to make, most notably the Mount Simon station.

It's about a 175 million dollar anticipated project.

We've already taken the initial few steps on that project, and you'll see some cash injections of capital that will start spending down reserves, and we are anticipating about a 240 million dollar debt issuance in 2027.

It's primarily focused on our need to add generating capacity.

In addition to that, there are some operating expenses that we're anticipating.

You've seen in earlier slides from the city administrators' recommended budget, a discussion about the enterprise resource planning software.

We're working together with our other city colleagues to explore the possibility of a joint ERP.

We currently operate on two separate systems.

In RPU, we've been on the same ERP system for 25 years.

These are projects that are very challenging.

They require significant capital expenditures for those major investments.

And you'll also see staffing recommendations in the limited term FTEs there in the RPU recommendation, up to eight limited-term employees to support core operations while we do the major data migrations as well.

There's a note there about benchmarking.

Just wanted to call your attention to that.

That was a 2023 state legislative session requirement for commercial properties of over 100,000 square feet, have to report energy and energy consumption data.

We as a municipal utility received a grant from the state of Minnesota supporting that benchmarking position for all of this year and half of next year.

So that's a continuation of that grant funded position into the next year.

The benchmarking legislation requires commercial buildings above 50,000 square feet to start reporting data in 2026 that kicks in next year.

So there's additional work ahead on that.

As I mentioned, some large capital expenditures to start building our new capacity in the electric enterprise.

We also intend to make some early commitments to renewable energy projects in front of the RPU board tomorrow night is a package of renewable energy projects seeking to try and secure renewable projects that still may be eligible for production and investment tax credits.

That will be back in front of council, we believe, with RPU board support on September 8th for consideration.

That is two years in advance of what our previous iteration of resource planning had anticipated.

There is some shorter term duplication of cost in bringing these projects on early, but we believe it will also preserve the opportunity for long-term cost hedging of lower cost renewables.

So that is another driver of the rate trajectory that you've seen in front of you is accelerating some of our investments.

And overall, all infrastructure across the energy sector has gone up as a combination of tax policy changes, inflationary pressures on transformers, import tariffs on copper, aluminum, steel, these are very capital-intensive and commodity intensive investments that we're making.

Also, I'll note our uh you've probably seen the headlines of our GT1 fire that we had, the failure of uh one of our gas turbines.

Um, so new news there.

We're we believe there may be a rebuild pathway to restore the capacity of that engine.

Um, and so we anticipate uh exploring the rebuild option, which would, if successful, and we can bring it back online through a rebuild option would offload some future capital investment as well and reduce that need for the debt issuance in 2027 uh considerably.

If there's any questions on the water or uh RPU enterprises, I'd be happy to take them now, or I could pass it back to Alison to summarize.

Mr.

Keene.

Yeah, again, I just again we went through a lot of this stuff here, and I I I don't know if it's getting through here, but these are this is a really big thing going on with the RPU right now.

And in a neighborhood like mine where the the house is a little more modest.

The impacts that we're talking about at RPU are a much more dramatic impact to my affordability than the levy things are.

Um, and we will continue as we should do these compares to what we were the year before, the year after or the years going forward.

And when you see numbers like six dollars a month hit on some of these things, it we ought to take notice.

This is a big deal.

But I think the more important comparison, what we're really trying to work towards is how does Rochester ratepayers compare to somebody in Bloomington or to see somebody in another place, whether they're an investor owned or another uh uh working on a um off of another power source.

Um the the other thing that uh this kind of slips by here, but we're going to take on a lot of debt that we have not we haven't had in the city before.

And I'm prepared for the fact that it may impact our our bond rating.

Um, I don't know that.

I um and I'm hoping it doesn't, but when I look at the ratios of what we're gonna have out on debt, those are the kind of things that'll they'll do that.

These are these aren't mistakes we've made, these are decisions we've made towards more independence.

Um, and we a lot of us were part of it back in 2019 to says we are going to uh go away from SIMPA.

We think we have the ability within our utility to generate our own power, which we didn't do back in the 70s, and we got caught in a long-term contract that we're now getting out of.

So if if you wouldn't want to spend more time with this, I spend a lot of time with this, and I I think there's um really important stuff going on here, and it's big.

Thank you.

Mr.

Palmer.

Yeah, and I'm gonna go off what kind of what Mr.

Keene's saying is residential is one thing, but but if you look at the large users of electricity like grocery stores, the amount of money that is going to cost them on this increase is is going to be passed on to the consumer, which is which is our person here.

The number one thing I want uh to make sure we get from um RPU is dependability and reliability.

And and I know that you preached that, but but I I I we have to be dependable.

We got to be there 99.9% of the time.

A question on GT1, uh you're talking about maybe rebuilding that.

Um is there I'm all in favor of doing that, but but is there a plan to then replace it?

Because it's as old as you know, I built when I was in high school.

It's older than me.

Yes.

I was in high school and it was built.

So I mean, do you do you get into this market of wanting to do that, or is that a side note for you?

No, it's certainly a uh a valid point, and it's part of our plan as well.

If we have a rebuild option to restore that capacity in the short term, um, we believe that a replacement of that capacity, probably about five years out, um, is uh what we would place back in our CIP.

So it would not we would not plan to run a 50-year-old combustion turbine indefinitely.

Um, and so we are looking at in conjunction with the rebuild option what the later ultimate replacement of that capacity would be.

And it could come in the form of a similar type combustion turbine.

It could come in a form of other capacity, such as battery storage as well, and we'll continue to evaluate what that capacity looks like and what options are in front of us over the next few years.

In my understanding, and I tell other people this is that that your thinking is the short term is 10 years.

Is that about right?

Uh yes.

Uh short term really is 20 years or beyond.

We build assets for the long haul, as as all utilities do.

We're not planning on assets being replaced anytime soon.

So we do have a long view of that.

10 years is a very short time frame for us.

And we have the coal plant up in um central Minnesota.

That is is going to be dismantled, and we don't have any obligation on that.

It's already funded to be dismantled.

Is that correct?

There is a um retirement obligation fund that's being built right now for its ultimate retirement.

It's a joint owned facility between Excel Energy and SIMPA.

Our membership of SIMPA ends at the end of March in 2030, and that unit is intended to run through the end of 2030.

So the timing and our retirement obligation is really a combined conversation about both our exit from the agency, SIMPA, and ultimately what the retirement obligation is there for the coal plant.

But you think you pretty much that that's already funded, isn't that correct?

There is a retirement obligation fund there.

And I think over the next few years, that will continue to be a conversation of what the adequate funding needs to be there in that retirement obligation fund.

My last question is Silver Lake plant, which's been there a long time.

My understanding is all the environmental issues have been taken care of.

Is that correct?

Uh so the facility has been there for a long time.

Completely agree with you there.

As far as it's still an active operating facility and will be through the end of 27.

We have done some uh ongoing investment in that plant to remediate asbestos and other things inside the plant, but the site itself um also has to be considered.

Um I wouldn't say we've done all activities there on the retirement ultimately of that plant.

Um and as far as the determination of what is next for that plan is yet to be determined.

Um we have a major substation there joining that site, and there's other significant utilities infrastructure that will remain beyond the end of the steam enterprise there.

So that's an active conversation, both inside the walls of RPU and with the RPU board about what's next there for um the next phase of what's at the Silver Lake plant property.

Thank you.

Any other questions from Mr.

McCollum?

Probably just a comment, maybe a question.

Um I think probably one of the sixth R's that we'll be talking a lot about is renewable energy, renewable energy credits and what that means and long-term planning for RPU.

So I would agree with Mr.

Keene that I think at some point it's worth a much deeper dive on some of the long-term planning.

Because I I think it's likely that people are receiving a survey seeing 2030 versus 2040 and saying either way, okay, great, we're moving to renewable energy.

And yet at the same time, we're talking about building new gas plants that are in service for decades.

So I just think it's worth a deeper dive into what we mean by renewable energy and make sure that as we talk about sustainability uh environmental responsibility, that that's all part of the conversation.

And I would just add too, I think the long-term planning of how we anticipate um gas prices to fire those and and what guarantees we have and what um uncertainty there is versus other um alternative uh sources renewables that continue to show that they're on a learning curve coming down in price and how we're planning for the long term for the best interest of the community, which have some really significant capital implications in the short term.

Uh so I would love to figure out how we have a broader conversation about that with the public beyond just the survey.

And um I feel like I had another question, but I'll I'll pass for now.

Uh thank you, Councilmember Miller.

You're making very good points.

It's a very active conversation happening in the RPU boardroom about renewable energy credits capacity and what the long uh long-term resource planning is.

We will be back to city council for a study session at the end of September to have a more thorough conversation here.

I'm also we are in the midst of kind of a tour talking to various community groups, stakeholders, stakeholder groups about this specific topic.

We don't have the time tonight as a as a part of the budget conversation.

But yes, I agree with you and look forward to returning in September to have a more robust conversation about that.

Thank you.

We invite Ms.

Zelms back walking up the fairway to the 18th group.

That's right.

Um I'm headed to the 19th hole, actually.

Um actually, when you have that conversation about the power resource plan in September, Tim won't even have to come here.

We'll just stay in his building.

Great.

So again, we've been through a journey.

Every um two-year budget requires a lot of preparation before we get to this point.

Um, so appreciate your indulgence on that.

Um, hopefully, you're taking a look at the budget document.

We will eventually either bankrupt um the flipping book company or get a flipping book.

Um, and um if you have only time to read through a few things, I would highly recommend the budget summary um transmitted letter, um, only because I spent a lot of time on it and it hopefully provide some insight on what I was thinking about with the budget.

Um, but again, if there if you feel like something hasn't been said yet this evening that you want us to talk about in um one of your upcoming study sessions about the budget, I'm sure that Mr.

Parrish and others have been taking feverish notes.

Uh please now would be a good time, or you know where to find me.

We still have two more who we'll put on the 18th green.

Mr.

Keene.

Good.

Nice to be back in sports analogies.

I'm just glad that he's not teeing off.

I'm just glad that he's not teeing off no I'm not I'm not at all and you know the question comes up is do you have other questions and depending on what these meetings are I mean if I needed to understand the budget the way Rachel does or that you do I'd have a lot more questions.

But these sort of meetings make me feel comfortable that the right people are looking at it and I think I I go back to what is my oversight responsibility and then how do I get that material and uh you know I've had six years of this I really feel for these new guys coming in saying what's going on here and what what are my controls and what what can I how can I impact this as one of seven um the one thing I guess I would like a little bit of a warning just the staff is so good at this stuff they move seamlessly from the big budget to something called levy impacts to something called general fund and it's hard to follow sometimes and it's something that's important for us to understand for for oversight.

The the other thing is as far as um I think there's two main metrics as a council member that I'm watching for this and we kind of breeze by them but this local tax rate and trying to keep it between this we've been as low as 46% and as high as 52% and we're at about 49 now and there's like so many things there's a lot of factors to come in here but this is a critical metric that as you see this climbing up that that's an impact that we should be aware of at least it's not that it's a bad number when it gets over 50 but it is an indicator that you it's more of a stress point.

I I would recommend for my peers to go around and check what those numbers are in the surrounding communities or in the in the twin city suburbs and you might get a better feel for where we're at in Rochester because we know we get the benefit of the high the the way this property values have been going up it has given us relief on this on this local tax rate but it's it's real and it's something that as a council member I think it's a good point for oversight.

The other one that again I'm going to point out is this this new construction stuff.

You had a good discussion here that you know a lot of this really is just appreciation growth but 2% of it is real new I mean it's basically there's new people coming into the pool and helping us pay the tax bill um and it's real when it's two percent in a in a in a community this big that's a big difference.

I look at that sometimes to say if we have a six percent tax increase and we have two percent new to uh two percent more capacity in the pool it's not a six percent impact and if I make the assumption that the five percent growth in a um uh assessment I mean I could make the case that a property like mine if it's valued they should the same that my taxes would go down year over year with uh you know at a a six point five percent growth in market value in a 5.9 percent impact it does it's not that clean and it's I don't want to get into the gorpiness but the that you know that's where we're at with it.

Um so uh I again I appreciate the goal of trying to take the those the uh changes and put them into the areas where you talked about the strategic uh uh goals but I also find it I mean it there's a lot of judgment that goes in there it's not the kind of budget math that I'd appre I appreciated these meetings so um with that I I again I feel I feel like if on these questions when I do have them I feel like I've got the right uh resources that I can ask so um that's where I'm at tonight thank you.

Mr.

Miller yeah thank you uh just a couple other comments uh things we didn't really touch on but as a new council member I would love a deeper dive or it could be an email into what's in the council budget um I know there are professional services printing advertising all sorts of line items that I I saw for the first time and I would just love a little more information about what gets charged there what discretion we have as a council and just more visibility.

You know overall I think this has been a good presentation I still feel like we've missed the mark on environmental responsibility about two years ago in the fall after the preliminary levy was set by the prior council there was quite a few people who came to speak um and I remember comments at that time being that it was too late and so I recognize that we have not set a preliminary levy yet uh that we're kind of two years past that cycle and this is the prime opportunity to be talking about what it means to meet the community expectations for environmental responsibility and our budget decisions and so I would maybe like a deeper dive on that it could be an update from the uh December 2023 integrated city sustainability spreadsheet that was presented but something like that how are we how have we adjusted because that's become a new uh strategic priority and I I think that that's a worthwhile conversation especially in the broader resource planning for RPU and other things because franchise fee right is one way that cities fund but that has a direct impact on how we generate power and the cost of generating power Mr.

Palmer.

This is I'm asking for advice or or if other people are see this as a need, but but you know, we did the pilot program on the gym.

Um we're hearing from the community that there's some need for a recreation um helping out kids going to to to our different recreation things.

How would you scholarship that uh type thing?

How would you suggest that we go about doing that?

That is quite a broad question.

I would suggest that if you want us to look at all of the there is existing scholarships that happen through the different um partners, um, perhaps um parks and recreation teammates could come up with I know they're already gathering this information, um, get some details on how that's working now and make some recommendations maybe on um like a dollar amount or a funding source that would help to provide additional support either to those existing scholarships or something new.

Um I would suggest that if you wanted to do that, you would likely be adding to your levy.

Um, and unless you really want to have a conversation about the trade-offs that you would trade off for that um and and be able to maybe come back at the second or probably not in 10 day in a week, but the following study session um that's about the budget.

Um perhaps they could be bringing that to you there, or we could provide you some information in between if we have a ballpark idea.

If if we thought I mean I go back to to the pilot with the gym, which came out as out of our contingency fund for this year.

If you wanted to do that starting this year, you do still have contingency left.

Um, but if you wanted to continue that on in the next year, you could again use contingency two years in a row.

So there we build in a million dollars of contingency into your budget, not because we want you to try to find a way to spend it.

In part, it helps to keep us at the 42% level at our fund balance if we're really successful.

Um, but you do have opportunities with that to either start now to um put something into the overarching operating budget um moving into the 2026 budget.

So you you have some options currently um within the 2025, you have that same option of using contingency again in 2026, but you could build something into the budget.

We just need a little more information from the team.

Okay, thank you.

So we're in a triathlon and Palmer's nearing the running.

Uh, but uh Mr.

Doran's on his bicycle seeing the uh finish line.

Not on my bike.

Um way too soon.

I have a very I have a very specific ask in regards to following up with uh with what Mr.

Palmer was just suggesting.

At our last study session, uh Council President Schubring asked uh about specifics about um uh about RCTC space, uh renovations to field house, dome space, all that kind of stuff.

I would love to see those numbers, uh even very preliminary numbers of what that would look like and impact that those numbers could have on the levy for uh community activity space.

Um I I I I would love to have that information out there so as we are getting feedback from community about uh a desire for more uh indoor recreation space.

We are have the in accurate information so we can respond to those requests.

Um, but also so we can evaluate moving forward with other uh big uh transformational capital projects in the community.

Uh and I know it's it's it's a very short time frame to turn that around, but I think it's an important just to even have those very preliminary numbers um or rough estimates uh in our decision making process.

Sure.

Thank you.

Any others?

Any final words from the administrator?

Thank you.

Then uh we will adjourn our next meeting will be in nine days at RPU on our same session.

Thank you very much.

I did think of something it's very fast.

Um I did just want to point out since the next study session is on a Wednesday, um, that we might want to not put your study session item out until Friday, just so we can answer as much of this as possible.

And it's yes, Wednesday the third Monday is a holiday.

You'll be at RPU and um we will try to get you as much of this as possible.

But if we need um to add things during the meeting, um that also might be possible.

So thank you.

We're reconvening the meeting for Mr.

Keene.

I just wanted to make a point.

I mean, I it probably just hit me that this is our last time in this room for a while, right?

Right.

This is yeah, and I I just want to make sure everyone knows that our next meeting is where the substitute room is RPU, and that's probably gonna go on for we believe that you will be there for two months.

Okay.

I I just wanted to get it said so the people who are watching our our replays or anything know that there's changes.

Thank you.

And to all, a good night.