Roll call, please.

Chair Johnson here.

My chair Young.

Councilmember Bowie.

Here.

Councilmember Cullman.

Councilmember Kim.

Here.

Council Member Joe.

Council President Maker.

Six present, one excuse being Council President Acre.

All right, thank you.

We are heading into budget season.

This is to kick off the first of many different department updates.

We'll be starting with the Office of Financial Services and also you as you may know in 2026 budget cycle.

We asked for quarterly budget to actuals.

So we will also be hearing from OFS regarding quarter two budget to actuals as well today.

So I will hand it over to budget manager Madeline Mitchell.

Welcome, Ms.

Mitchell.

Thank you.

Good morning, Chair Johnson, Council members.

My name is Madeline Mitchell.

I'm the city's budget manager, and today I'm going to walk you through the mayor's 2027 proposed budget.

We will start with the overall budget picture, including the 26 million dollar general fund gap that you've all heard about, and how the proposed budget closes that gap.

Then I'll walk through spending and revenue changes and then go department by department through the major general fund changes, finish with some uh special fund investments, and then what that proposal, what the entire proposal means for the typical St.

Paul household.

Um there are a lot of individual decisions in this budget, and I won't be able to cover all of them, but I will do my best to focus on the things that are most important for overall understanding of the budget and the choices that are embedded in it.

Um as we go through this, please um of course feel free to stop me with questions.

My team and I are here to help you understand uh both the financial implications of this proposal and as we move through the process, the implications of any changes that you may want to consider.

Before we start, I'd like to take a moment to recognize and thank the members of the budget team who have worked so hard in preparing this budget.

Mati Guerra, Brian George, Shannon Forney, Michelle Botco Woods, Emma Schusterm Abis, and our finance director, Joe Harney.

Um and I would also like to thank our partners and colleagues in departments.

We have a lot of department staff here as well.

Um so thank you to everyone who worked so hard on this budget.

At the highest level, the 2027 proposed operating budget is approximately $888 million.

This includes a 6.8% property tax levy increase.

It funds nearly 3,200 FTEs, and its development was guided by four principles laid out by the mayor's office.

Uh promoting long-term fiscal sustainability, strengthening community safety, supporting a thriving business environment, and responding effectively to residents' needs.

We'll go through some summary slides in a moment here, but I first want to talk about the 2027 budget environment, as you have all heard before.

Every year we start the budget with budget process with a gap, and that's because the cost of doing business, of doing the same thing that we did last year under this year's conditions, gets more expensive every year with increasing wages, health insurance rates, fuel costs, etc.

Our revenues don't automatically grow to keep pace.

So for 2027, our starting budget gap was 26 million, made up of inflationary salary and fringe growth, reabsorbing costs from the ARP phase-off, funding the debt levy, and then covering other increases like utility adjustments and reflecting um costs that were added mid-2026 into the 2027 base budget.

Uh and that's all before adding any new spending.

I'll note here that 74% of this budget gap is driven by employee expenses, which is pretty comparable to the amount of general fund spending on personnel.

Um and for reference, a one percent increase in the property tax levy yields about 2.2 million in revenue for the city.

So if we were to close this entire gap with only property tax levies, this would mean a nearly 12% levy increase.

When we talk about balancing the budget or closing the budget gap, we have three level levers to pull to get that gap to zero.

We can either increase the property tax levy, reduce spending, or find new non-property tax revenue.

Uh we have control over some of the non-property tax revenue uh in that we can set rates and fees, but much of it is is out of our control.

Um, and that is either because it's volume-driven or inflationary, or in cases of um things like our pension aids and local government aids, it's set by another body.

So that really leaves property taxes and spending reductions as our most powerful tools for balancing the budget.

And Ms.

Mitchell, we also have a question from uh Councilmember Bowie.

So Councilmember Bowie.

Yes, thank you, Chair Johnson, and thank you, Mitchell.

I just have a quick question, just a point of clarity of the last slide here about the debt levy.

Can you just as a point of clarity, can you um just define judgment bonds and how those are different from standard obligation bonds?

Yeah, yeah, definitely.

Um council or Chair Johnson, Councilmember Bowie.