 Hello and welcome to our meeting for today with the long-term financial policy and audit subcommittee. Today is April 27th, and it is 4 p.m. And we will begin our meeting. Victoria, may you please call the roll? Chair Rogers. Present. Member Staff. Here. Member McDonald. Let the order reflect that all subcommittee members are present. A little bit of housekeeping as members of the public join the meeting virtually. You will be participating as an attendee. Your microphone and camera will be muted. If you are calling in from a telephone and choose to speak during the public comments portion of today's agenda for privacy concerns, the host will be renaming your viewable phone number to resident and the last four digits of your phone number. Victoria, can you please explain how the public can make public comment? At each agenda item, the item is presented. The chair will ask for a subcommittee members comments and then open it up for public comment. The host in Zoom will be lowering all hands until public comment is open for the agenda item. Once the chair has called for public comment, the chair will announce for the public to raise their hand if they wish to speak on a specific agenda item. If you are calling in to listen to the meeting audibly, you can dial nine to raise your hand. The host will then call on the public who have raised their hands. Public comment will be limited to three minutes in a time where we'll appear on the screen for the subcommittee members and public to see. Once all live public comments have been heard, the meeting host will read email submitted. If you provide a public comment on an agenda item but also submitted an email, your email comment will not be read during the meeting. Additionally, there is one public comment period on today's agenda to speak on non-agenda matters, which is item two. This is the time when any person may address the subcommittee on matters not listed on this agenda. Thank you. We will now move to item two, which is our public comment on non-agenda items. We are now taking public comment. This is the time when any person may address the subcommittee on matters not listed on this agenda. If you wish to make a comment, please raise your hand. If you're dialing in via telephone, please dial star nine to raise your hand. May I sit down? Yes, sir. My name is Dwayne DeWitt. I'm from Roseland. And I wanna thank you first and foremost for unlocking the meetings now for in-person public participation. Again, it's very nice to see you, Ms. Mayer, Ms. Vice-Mayor and Mr. Staff. It's a good thing to be able to come and speak with you in a non-technical manner. I wanted to speak with you today about how last year's budget pointed out that there's a $662,000 yearly responsibility for Roseland roads due to the agreement that was made for the annexation between the county and the city when the last five years, the last portion of Roseland was brought into the city. It was at least for five years. I'm hoping that you folks can keep this thing alive for longer because the roads over there are in even worse shape now in many ways, especially after this very harsh winter. There's potholes everywhere. Big roads like Barham Avenue and South Avenue are in total need of total rebuild, not just a overlay. And I don't think that this amount of money that's been put aside over these years, $3,300,000 has been enough. And so I know that there's gonna be budget tightening now. You're not going to be getting more money coming from the federal government due to the COVID-type activities in ARPA. But I was hoping you folks could talk amongst yourself and get also with the larger council, the representative for that district and work something out to get these roads repaired now. Some of these neighborhoods in an area of Roseland, we call the woods. It's down to the very southeast corner. The roads there, Smokewood and other, they're totally just beat up. And I've been that way for a number of years because the county didn't wanna do anything until the annexation. The city wanted to wait until they got the funding from the county. And we're in this dilemma where people are living on almost rural type roads in the city. They're just beat up pothole roads. So I'm hoping that you'll take it on yourselves to look into that and perhaps do an audit of where the money's been spent so far, where it's planned to be spent. Because what we're told by city staff is it has to be warranted. And they make the decision on what's warranted where it can be spent. The people who live on a road that's all beat up, they're like, hey, it's warranted right here. But staff may have a different approach. So if you folks could make that happen in the sense of at least getting out the news to you so that we can share with others as to why things aren't being repaired as quickly as we thought they would. It's not just because of COVID. I mean, there's other things involved, I'm sure. So remember the annexation occurred after the fire. So they knew it was happening. Thank you, county, for your time. I'll just be back here being a quiet guy. Thank you. Seeing no additional comments in person, close, are there any hands raised on Zoom? We do not have any hands raised and we did not receive any emails. Thank you. We'll continue to item three, a pool of minutes. Are there any corrections to the minutes? Seeing none. We're looking at minutes from January 26th, 2023. May I get a... Move to approve. Yeah, so move. Do we have to approve the minutes or do they just... All right, same objections. Minutes will be approved for January 26th, 2023. Moving to item four. 4.1 is our fiscal year 2023 quarterly budget review. Veronica Connor, budget manager, will present the third quarter financial update and long range financial forecast. Yes, thank you. I have a lot of financial information to go over with everybody today. So we'll try to get through this without overwhelming everyone. Go to the next slide, please. So we're going to start out by taking a look at our third quarter results and then we'll move into the long range financial forecast from there. So this first pie chart for you is just a snapshot of our adopted budget, of all of our revenues within the general fund. And we just always like to put this up to remind everybody that that large orange wedge and the second largest blue one, property tax and sales tax, is the majority of our tax revenue here in the general fund. That's what funds the majority of our operations. It makes up about 56.4%. Next slide, please. And this table here is a pretty straightforward data for you of where we've landed the third quarter. So our first column or the second column over that says adopted budget, that's what was adopted back in June. There's been very minimal changes to this budget and the changes column. The final budget column is just the summation of those two. And then year to date actual shows where each of these categories have landed for the third quarter. So being March in a whole fiscal year, we might expect to see a 75% amount and that percent received column, but that's not necessarily the case for some of these items due to timing. I'm just gonna kind of go down the line for you here and give you an overview. Property taxes is split up in two installments. We get 55% in December and 45% in April. So we are right on target with where we would expect. Sales tax is on a two month lag. So we are always two months behind. 58% is actually exactly seven out of 12 months. So this also looks like we are on track, but I do want to give the warning that our sales tax consultants have seen what they predict to be some leveling off in calendar year 23 and sales tax. So we will get into that more when we look at our forecast and predict our final numbers for the year. But as of the third quarter, we were right on track. Utility users tax has been coming in a bit above trend. We've been seeing high revenues, particularly in PG&E and energy costs. This is just a factor of costs going up. So therefore the percentage that this tax is based on stays the same, but the overall amount that comes to us has gone up a bit too. Other taxes, we're going to look at that in the next slide because that contains some pretty big areas that we like to touch on. Licenses and permits, this is our PED revenues, our engineering and planning fees. And these are coming in a bit ahead of schedule. We have been making a big attempt over the years to increase our budget to match the actuals with this. And we're kind of narrowing in on them as we go. So we'll get into that more and also in the long range forecast. Charges for services is also coming in high. This is some of this is also those PED revenues that we see building and planning fees, but this is also recreation revenues. Recreation revenues have been coming in very high to pre-COVID levels. We've been a little cautious in seeing where the recreation programs are recovering and we're glad to see them recovering well. Intergovernmental and fines and forfeitures and transfers in, these are smaller categories that all look to be coming in right about where we would expect for this time of year. We'll go to the next slide, please. So other taxes, this is a breakdown of the category I mentioned on the previous slide that we were gonna look at because this includes some pretty big ticket items. So VLF swap, this is a decently high dollar amount, but this is also received with property taxes and we get 50% in December and 50% in April. So this one's trending just a little bit high. Franchise fees are received in April and we tend to see more of them, so they're received throughout the year, but we tend to get a big chunk of them in April. So we see a larger portion in the second half of the year. So this one is also on track for what we would expect. Motor vehicle license fees is coming in high, but it's also a smaller dollar amount. So this isn't really gonna make or break our general fund. And the cannabis industry tax is one that in the last few years, we've kept the budget steady at 1.8 million. That's kind of where we've seen the market stabilize. So even though this might look like it's a little ahead schedule at 84%, it may come in slightly high, but we don't really see that as an indicator of the trend changing. It's just some years it comes in a little high, some years it's a little low. It's kind of stabilized around 1.8 million. Real property transfer tax is one that we were optimistic about last year, but it's coming in low. So this particular tax revenue is based on both home sales as well. So it's volume as well as price of home sales. So we know that prices in Sonoma County has stayed pretty consistent. We haven't seen a drop, but the volume has slowed way down. So what we used to see in our real property transfer tax is starting to slow up and we don't think we're gonna hit our budget amount here. And then finally, occupancy tax. We're exceeding that three quarter year mark by just a bit. So we expect to come in just a little bit ahead of budget on this one since the tourism market has been recovering nicely since COVID. And next slide. So this slide shows us a comparison of where revenues were in the third quarter last year to where revenues are in the third quarter this year. Making a big general statement, we might expect to see like a three or 4% increase in any category. That's kind of what we see change over year over year, but some of these obviously vary that I will touch on. Utility users tax, that's one that I mentioned was coming in high due to energy costs increasing. Licenses and permits has dropped significantly, but that's due to a reorganization. Last year we moved the utility billing function out of the general fund. So water would pay for it. And actually we would see revenue come in from the water department, but that has moved into water, into the enterprise fund. So we no longer see that revenue stream, but there's also a corresponding decrease in expenditures. So it's a net zero change. Charges for services are slightly lower than last year year over year and that's due to some of our PED revenues. So I've mentioned recreation revenues are coming in high, which is great, but PED revenues are kind of slowing as compared to last year. And then fines and forfeitures, we've seen a 10% increase. This is just due to parking violations. There's an increase in them as we have done away with some of our free parking programs. And next slide. So finally, we're kind of taking a stab at where we think the year is gonna end in revenues in the general fund. As I mentioned, property taxes is right on target. So we think we're gonna just come in right around budget on that one. Sales taxes is on target to date, but our consultants are predicting a general slowdown. So we do think we're gonna not quite hit the mark according to what they are saying. We're gonna come in a little bit low. UUTs gonna be coming in high. As I mentioned, those energy costs have been favorably affecting that one. Other taxes due to some offsets, I mentioned some of those revenues were coming in slightly high, some were coming in a little low. We think overall that category is gonna come in right up budget as well. So licenses and permits and charges for services projecting out, we're gonna see a surplus in both of those. And this is due again to PED revenues being higher than what was budgeted. We've looked at the quarter to quarter last year. So they are coming in lower than what they were last year, but still higher than budget, if that makes sense. As well as recreation revenues are coming in high. And then our smaller categories and transfers in, we expect to hit budget amounts. So overall, we're looking at about $2.8 million surplus in revenue. And that's just the revenue side. You may recall when we adopted the budget, we did adopt a balanced budget. So seeing amount coming in above schedule for revenue is a good thing. That adds to our bottom line. So we're not having full staff. Well, this is just the revenue side. So we'll get into the expenditures and that's where the staffing picture comes in next. So that's part of our next discussion. And next slide, please. So expenditures. This is also just a snapshot of what was adopted. And the general fund, the vast majority of our expenditures are salary and benefits. That blue wedge and the orange wedge, it comes out to be about 75, 77%. So when we see any big variances, it usually occurs within salaries and benefits. And next slide. So this very detailed small table for you breaks out spending by department. And again, being the third quarter, we might expect to see 75% in that final column. But anything less than 75% is not a concern due to a lot of lag on payments of invoices and contracts and things of that nature. Some of the bigger variances here is in city council. They did not spend the community promotions budget that we had there. It was only $100,000 and that was moved to the PED department is why? So it might look like there's very little spending there, but at the end of the year, it's, I believe mid-year, it was moved out to PED. So just year to date, it looks a little off. Human resources, that was another one I picked out. Let me find it there. Yeah, that one was trending high. This is due to a new way we've been accounting for our third party FSA payments. We have money coming in as well as money going out that was not budgeted. It was a mid-year change. So it's just sort of artificially making their budgets look high, but there is a revenue offset for that that we've captured in their budget next year. And the other one that really stood out to me was the 90% of water. And even though this is a very small dollar amount, water has a small piece of their department that is funded by the general fund. And this is just a function of not as much work as they thought would be funded by the enterprise funds or funded by the enterprise funds. So they had a little bit more work that was funded by the general fund than planned. And next slide, please. So again, we have this broken out for you by department and this is the quarter to quarter change. A good benchmark to expect would be anywhere from a maybe a three to 7% increase. We see increases every year in salaries and benefits and services and supplies. We don't really see things held flat or go down. So we do see some pretty significant changes that are outside of that window, which I can speak to in city council. Fiscal year 22-23 was an election year. So there was high expenditures in 22-23 that we did not have in the year prior. And city manager's office, we had a restructuring where we moved into assistant city managers from other departments. So that also inflated their expenditures in the current year that were not there in the previous year. And finance, we see a significant decrease. That's that utility billing move I mentioned on the revenue side. So this is the expenditures. We see a decrease in the expenditures here because now that function is being paid for by the water enterprise funds. And housing and community services, that's a very small dollar amount, but a high percentage, that's just a timing issue. They have subrecipient funding that they spend that has just not been quite paid out yet. I think that was all I had on my list of some of the bigger experiences. So next slide, please. So salaries and benefits expenditure forecast. I mentioned in the general fund, salaries and benefits are the largest expenditure that we see. And projecting out what we've spent, so we see what we've spent so far, that's the blue piece of the pie, three quarters into the year, this is the money that's gone out the door for salaries and benefits. And our projection of what we are going to need to pay out for the fourth quarter, April, May and June is the orange piece. And then finally that gray slice, that's what we predict will be under budget. So that is about 4.2 million. Now the caveat that I always give here is that as we get towards the end of the year and departments see that they're going to have salary savings, it's pretty common for them to reach out for city manager approval to use some of these salary savings for one time projects or needs that maybe they're trying to get in within the current budget year before we roll over to next year. So we might see this number go down, it just depends. We don't like to authorize that spending until we know for sure there is salary savings. We don't authorize that back at the beginning of the fiscal year, we wait till the very end. So this is what we're seeing now, but this number might change. You have to use so much of that to lure Sue's successor, right? I know, there's some. This, and I'll mention too, we did factor in the police department has an incentive program going on right now with some of their salary savings that they're also trying to lure in additional staff and hiring people. So we factor that in too. We do see potential uses of salary savings that we're trying to get creative with because we know it's appropriations there that we can't spend. Next slide. So putting together our projection of where we think we're gonna end the year. We were seeing that we were coming in ahead of schedule on revenues by about two and a half million and we were gonna see that turn back of salaries and benefits of about 4.2 million. We also expect embedded in that operating expenditures line item is for services and supplies. The trend is usually about 98% is spent every year. Departments will make an effort toward the end of the year to encumber, to put things into contract, but not usually all of it is spent. So all things considered with transfers in and transfers out, usually equaling what was budgeted. Those are usually always right on target because that's kind of a known amount. We think we're going to be ending this year in a surplus of about 5.2 million. And that's the end of the third quarter update. I'm happy to answer any questions on this before we move into the long range. Financial forecast section. Yes. For me, you mentioned the increase in city council costs during the election year. Look into that. So there's professional services costs and printing costs. We pay money to the county of Sonoma for ballot items or items on the ballot and it's pretty significant cost. So it's usually, I want to say a couple hundred thousand per measure. Okay. So we'll do that. Okay, interesting. So whenever it's an election year, you're going to see that cost go up and then it'll go down the next year. It's just a fluctuation. Got it. All right. Thank you. Yes. On the five million dollar surplus, does that come over the next year? Do we try to extend it throughout the year? Does it start? Do we start to knock out some IP projects or? So it will go back into a fund balance if nothing is done. But there is, yeah, usually when we have a surplus in general fund reserves, the effort is to try to capture some of that for one time projects and things we need money for for one time spending. Yeah. Over the past, say three years, what's our surplus been at the end of the year or at the end of each year? What are we running out? Well, so that's a good question and thank you very much for that. It's also a difficult question because of what we have gone through in the past three years, right? We have had during the COVID years, we held our revenues pretty low, not knowing what was gonna happen in the economy and locally in terms of revenue growth. It turned out that the revenues grew a lot higher than what we anticipated. And we were also dealing with significant salary and benefits turned back. So I don't have the exact numbers but the end of year surpluses in the last couple of years have been pretty significant. And what it's done is it's just grown our reserves higher. Where possible we have as Veronica points out, those are the dollars that are ideal to try to tackle some of the big ticket project, one-time project issues that we have. And it allowed us to move money to her and interchange. That $8.6 million that we moved over there, that was a function of those surpluses that happened in the prior years. I forget where we ended in fiscal year 22, but we got a lot closer to, so there was much less of a surplus, I believe. So it was around $3 million. Yeah. And a lot of that was because we went in the mid-year and we adjusted our revenues up because we knew that we were out of COVID. We started to see really what our revenues were gonna be. And so we made a conscious effort to raise our revenues to make other adjustments in our budget to be more realistic to what we would see at the end of the year. And we got a lot closer to what, to where we should have been. Up to $5 million, just so I'm clear, 4.2 is around salary and benefit expenditures that were not expending. Right, we still have a pretty significant, you can see. That's what I would say. And that's where that's coming from. Now we've done things on the expenditure side to try to offset that. So not to get too technical, but we have what we call a vacancy credit, right? So we take our positions, for every position that we have, we budget them 100%. So obviously if you have a lot of vacancies that overinflate your expenditure budget. So we put a negative number of credit in the budget that helps offset that that vacancy amount. And so what it does is it brings your expenditure budget a little closer to reality. It doesn't overly inflate it and that's where we try to be with that. So we have, we increased that in 21 when we went back to the council or 22, I guess it was in February of 22, we increased it. I think we increased it for the 22, 23 budget year and it's our intention to increase it again, I believe for 23, 24. All of that is taking note of where our vacancies are. And citywide, we, the last I had heard, the last report that was, or report out on that, I believe it was 9.7% citywide. So that is all funds, but there are significant vacancies obviously in the general fund. And then for our overall budget, it's about half a billion dollars if we added both of them together. So if you're coming in at 5 million, what's that percentage? I mean, what's like the normal percentage? Cause it seems pretty low when you look at how big of a budget we have to target and come on budget. Right. It's our ideal amount, like a percentage of that amount, I should say. Right. So the 5 million we're talking about is just in the general fund. Okay. So there would be some, there's likely gonna be turn back in the other funds. And they, it happens exactly the same for them, right? So let's say water funds, our other very large personnel, heavy funds, if they have salary and benefit, turn back, that's gonna go into their water funds. So when you're talking about a four to 500 billion or million dollar budget that's citywide and each individual fund that is having, you know, surpluses, it's going back into their reserve. So if you're looking at it just from a general fund standpoint, we have about, what is it? It's about a $200 million budget. And $5 million of turn back going back. That's not too far off from where that budget was. That's actually really not bad at all. Right. I just am trying to establish kind of where we're at in each of the budgets. If we are able to reinvest in things in the city, whether it's employees or infrastructure because we're not having large surpluses in each of the funds at the end of the year, which I realize on a $200 million budget, a $5 million is relatively small. I'm just kind of curious how the other ones kind of lie and that might not be in this presentation that I want to maybe look at. Well, I would say it varies pretty significantly operation to operation. Things that happen in the water fund is very different than what happens in our parking fund. And yeah, so it's hard to say. There's a general percentage for all different operations out there. That's how they're all each done. Thank you. Any additional questions? I did out of curiosity. Can you, because I always want the city manager and city councils together, can you tell me some of the differing things that come out of those live items? Yeah, so on city manager, you have your city manager staff. That's probably the biggest expenditure of your city manager, your assistant city manager is both of them as well as administrative staff as well as your city clerk staff. And then all of the services and supplies budgets that support them. And I don't think off the top of my head, I don't think there's anything hugely significant in their services and supplies. I think it's mostly conferences training, some small professional services. And then in city council, that is mostly your city council salaries. There is a small services and supplies budget in there as well. And then in the election years, that's when we see the big spikes. And previously we had the community promotions budget in there annually, which was about $125,000. But that's something we're gonna be moving to economic development next year. And they will be the ones handling those funds going forward. But there's no, the big variance there between the two departments, I would say is that in city council, you don't have the staffing costs that we see in city manager. It's mostly the difference of people. Perfect. Seeing no additional questions, we'll just continue. Sure. So our next section is the long range financial forecast. And so this leaves behind fiscal year 22, 23, and we're looking forward. So as of July 1, fiscal year 23, 24. Next slide please. So this is our five year outlook. And a version of this was just shown at council goals in March, but we've since adjusted it. The first column of fiscal year 23, 24 budget, this is our proposed budget for the next fiscal year. We're going to be coming to council in May and taking a deep dive into this column. And you'll see it comes out at a 2.5% deficit, which isn't what we wanna see, but after our best efforts, this is where we've landed. At 2.5% or 2.5 million? I'm sorry, 2.5 million, yeah, thank you. And then in the out years, all of these out years fiscal year 24, 25 through 27, 28, these revenues and expenditures are all grown off various factors that we'll get into more detail in the next few slides. And you can see the bottom line is growing. So that deficit just gets larger and larger as we go out. And one of the big things to mention here is that this forecast, we try to include things that we know for sure are happening. So there's a lot of council discussion out there about things that may or may not affect the general fund. We don't put those in there because we don't wanna bank on them happening until we know for sure. And the biggest one are labor contracts. So MOUs are gonna be up at the end of fiscal year 23, 24. And all bargaining units starting in 24, 25 will have new agreements. And that's gonna significantly affect that expenditure line item. So moving forward, next slide, please. Do you ever build in in the expenditures? Do you ever build in like what we've done in the past if it's 3% or 5%? Yeah, we have the ability to do that. We can run really any scenario. But for the purposes of putting something up in front of the public of showing what we've got for now, we don't really wanna make assumptions ahead of the game. So I'm going to dive in to all these many categories in revenues and expenditures. And the long range forecast is a enormous Excel workbook with hundreds of different line items, but we're trying to kind of condense it for you here and not to get too wild, but to go over just some of the assumptions that go into these revenues and expenditures. So our revenue table, these are the same categories that you saw previously when we were looking at the third quarter updates and we are projecting these out. We will look at property taxes and sales taxes more in the next few slides, as well as other taxes, but some of the smaller categories all kind of touch on here. UUT is one that we've seen growing. So we're kind of growing that one at a modest rate. We've seen a big spike in energy costs in the last year or two, but we don't continue to expect energy costs to grow at that rate year over year going forward. Is that including water as well? In water, I'm sorry. In the utility user's tax, does that include water as well? No. I don't think so, yeah. It's PG&E. Okay. It's also telephone and cable. Yeah, got it. We do see like telephone is one that we see dropping off, but it's not as high dollar amounts as PG&E ones. So they kind of equalize each other. And one of the things to point out with the UUT telephone is that it essentially just covers land lines. We lost the, we tried to have it passed in 2014 to include cell phones and we lost that election. That is, that's a significant amount of revenue that could be out there. Unfortunately, it's very difficult to try to explain that. So, you know, we will most likely try again at some point. What kind of moving on down the line? We see licenses and permits taking a small dip. That's due to a drop off and encroachment permits that PED is projecting. PG&E has been doing a lot of maintenance work post fires. Let's get a drop off and then we'll see things start to recover. Charges for services. This includes a lot of our recreation revenues that we see growing, which is a good thing to see. Intergovernmental, this is a small revenue stream that this is mostly revenue from the county for Roseland. So fines and forfeitures. This is primarily parking violations revenue, which we don't see growing at enormous rates, but it's gonna be steadily increasing over time. And yeah, these smaller categories, nothing terribly exciting in them. Interfund charges, this is our, mostly our cost allocation plan of enterprise funds and funds outside the general fund that pay into the general fund for our administrative services. And next slide, please. So just a look back at sales tax and property tax performance in the context of budgeting for both of these significant revenues. We've been making a big effort in the last couple of years to bring our budget estimates up higher to be in line with actuals because we've seen in the past a divergence between the two. A lot of this has had to do with the uncertainty of the fire years and COVID, but in a nutshell, our budget numbers have been too conservative. So you can see a gap there between our budget line being low and our actual revenues collected being high, but then you see them kind of start to close in as the trend line continues. So we just wanna call out that we're making an effort to close that gap and we're hoping to do that in the forecast as well and see those kind of line up more. Next slide. So this is our sales tax revenue growth in the next several years. You can see it's pretty steady. This is our largest generator of revenue in the general fund and we mostly rely on our consultants at Avenue Insight, but as we have said before, they do project somewhat of a leveling off in the future in calendar year 23, but then they expect it to recover somewhat. So this year over year growth on this chart is not the year over year growth we've seen in the past. Coming out of COVID, sales tax came in higher than anybody thought it would, but in future years, we do expect to see it grow, but just not quite at the rates that it has. So one of the things just to kind of expand on that just a little bit, we are seeing from not only from our own revenue analysts, but the other major revenue consultant consultant in the state that what we're seeing is a definitely flattening and leveling out of sales tax. There's less stimulus money in the economy, there's less spending, it makes sense, right? You've spent that down. What we do is we take that and where our consultants come in and they are admittedly conservative and we try to reflect what our local trend lines are. So when they forecast and they may forecast something low, what they're doing is they're taking our past performance specific to Santa Rosa and then going forward, they take national trends, regional trends, state trends and apply that to Santa Rosa. We look at that, but we take it with a grain of salt based off of our auto industry, our auto sales, transportation related sales taxes have continued to buck the trends of other areas. So we may put more weight into that and that's why we think it's reasonable to not be as conservative as our consultants and project a little bit more modest growth than what they would. And we've talked this out with them and they say that where we're going with this is reasonable. They are inherently conservative so they're always gonna take that conservative path, us going a little bit more over that is something that they could at least buy into. So that gives me a feeling of confidence that we're not getting too far out on a limb. And again, the idea is to be as realistic as possible to provide as many resources without getting too aggressive. Thank you. No, thanks. Extra information, always good. Next slide, property tax, also a significant revenue source in the general fund, also with a pretty linear revenue stream. We use a three-year average for this. We found that a five-year average is a little high because that includes a lot of the post-fire rebuild sales period, which was an anomaly. And the 10-year average starts to dip back into the post-recessionary time also. So the five-year average is 4% and the 10-year average is 5.3%. But we go with a three-year average, which is what we see other similar agencies do, and that's 3.5%. So that's what we project property tax growing at. And next slide. Other taxes is that category I mentioned that has a lot of significant items all blended in. And to just mention most of these, we predict based on previous trends. So VLF swap and franchise fees and motor vehicle license fees, those are all ones that we just look and see what they've done in the last 10, 15 years and kind of take an average. And it's all pretty modest growth, 2%, 1%. Cannabis industry tax, we hold flat at 1.8 million. I've mentioned this is one we see go up and down a little bit, but it's not heading in any one direction or the other. Real property transfer tax is one that in the moment is low, and we predict this to be flat in the next fiscal year 23, 24 and 24, 25, but then we do expect it to rebound as hopefully the market recovers. And occupancy tax, we predict this will be growing at a steady 3% with tourism recovering and more people traveling and coming to hotels. And next slide, please. So now we're gonna transition into the expenditure side of the discussion. We looked at some of those big revenue categories, but looking at expenditures, which we typically break down between salaries and benefits, which as I mentioned before, is the majority of the general fund and then services and supplies. So in our long range forecast, we do not include a growth factor for additional staffing. We don't assume we're gonna be adding staff, we just keep the current staffing level. We grow this at about 1% every year after fiscal year 23, 24 for step increases, merit increases, things of that nature. But as I mentioned, we do not include an assumption for a COLA or cost of living increase. And if and when those cost of living increases come in, that's gonna affect our salaries line item as well as the per's normal retirement line item. So those are gonna increase significantly. Our UAL amount, that's our unfunded actuarial liability. We have a slide after this to look at that in a little more detail. As you may recall, we opened our 115 trust last year to help mitigate the costs of this. So we have that factor built in, we're hoping the interest rate or the earned interest from that fund as well as we have a pension obligation bond retiring, that debt service payment, we're gonna be able to take those to offset some of our UAL costs in the future years. We've built that into this forecast as well. All other benefits, we have those growing at various rates, certain things like healthcare, we see a trend, it's usually anywhere from 5% to 7% every year. Other smaller things like life insurance and disability are smaller, so it's usually around a 1% rate. But moving down into services and supplies, same thing, this is a line item that is broken out into dozens of different categories. We grow certain ones that we know we can't control, such as fleet costs here at the city. We know gasoline, we know repair and maintenance and replacement costs for all our vehicles just get to continue to grow. We do not grow everything such as supplies, office supplies, meetings, conferences at a steady rate because if we did, the general fund would just be sunk every year. We cannot include a CPI factor for everything. We try to keep things at 1% or flat where we think we're gonna have control over it, but the things we know we cannot control, we include those inflation factors. And then O&M projects, these are our projects year over year, there's a certain amount of general fund money that goes into these and we see these growing at kind of a steady rate as well, nothing too out there. Next slide. So here's our CalPERS unfunded liability chart for the next five years. And as I mentioned, these numbers are net of a mitigating factor that we've already added in. So we get a report from CalPERS every year that shows us what they think our unfunded liability amounts will be in the next five years, that changes. So this is not held fast. This depends on what the market does. It depends on a lot of different factors, but at this time, this is what we know. And we've also then reduced each year for the three million-ish around there very slightly every year of what we think we're gonna be able to offset that cost with. Nonetheless, we still see these growing by $4.3 million or 17% over these next five years. So these costs are significant in the general fund. And next slide. And then finally, just to break out of our transfers out in the general fund. These are a little different than expenditures. It's just funds within the general fund that we just do transfers to other funds for various reasons. The parking fund, we transfer money every year from the general fund to pay for parking enforcement. And this is because we collect the parking violations in the general fund. So since we collect the revenue, we transfer the funds to parking to pay for their parking enforcement officers. And we see this amount in the future years, somewhat holding steady, it does increase with staffing costs, mostly salaries and benefits for those parking enforcement officers. CIP projects, these, this is money that we transfer out to the CIP fund, mostly from, sorry, this is mostly revenue that we get in from the county for Roseland Streets that we transfer out and also money that we pay for ADA projects, the American Disability Act. I think that's what it is, projects that the general fund pays of 1.2 million for every year. So that goes straight into a project key within the CIP fund. So affordable housing and homeless services is one that is going to take a jump in a few years because the general fund historically has always paid for our homeless services operations, but temporarily we see ARPA funds paying for that. So we know ARPA is currently paying for homeless services and I believe fiscal year 23-24 and then part of 24-25 and then starting in 25-26, the general fund is gonna have to pick up the tab again on that one. We do still see revenue being, I'm sorry, expenditure, we still still see an transfer out. I don't wanna call it an expenditure revenue, it's just a transfer out of 2.1, 2.3 million going to affordable housing and homeless services. And this is because by council policy we're required to transfer a certain percentage of real property transfer tax out to this purpose. So even though ARPA is paying for homeless services, we're still transferring out these funds for affordable housing. So there's a little bit of a, trying to kind of project out where we think that's gonna be in fiscal year 25-26, more of that, well instead of going to affordable housing may go back to homeless services, we're kind of trying to judge how that's all gonna fall into place as ARPA funds expire. And then finally, miscellaneous, this is various small pieces such as the courthouse square debt services, the general fund transfers out a small amount to art and lieu funds. And it's high in the first two years, there are 23-24 and 24-25 because we are anticipating the general fund needing to subsidize the Bennett Valley golf course in these first couple of years with this new operator in place. And that concludes the presentation. So I know this was a lot of information and a few slides, but I'm happy to answer any questions that you may have. Couple, one question, coming back to that sales tax, new growth chart, I'm just wondering, are those the correct numbers? It looks like on the table, the sales tax goes from like 75 to 77 to 80. So that's a good question, I'm sorry I didn't point that out. This particular graph, we just used the Bradley Burns portion of sales tax which is the biggest portion we get from the state because that was an easy to identify amount that we see in our consultant reports. There is also a portion that we get from, is it measure Q? Can I remember the Q? It's an actual measure Q, which is the half cent sales tax measure that's just specific within Santa Rosa. So that is a different, it has, believe it or not, a slightly different trend than this one. So we just capture the Bradley Burns here. Oh, interesting. Sales tax is a little more complicated than I thought. Yeah, the more I dig into it, the more I realize, oh, this is not as straightforward as you think. Can we only get the number that appears on the table? We only get that retroactively. We have to look back to cover it all together. Well, we get, so this amount here is, well, I'm sorry, get them retroactive. At the table for like the revenue transfers in, sheet, projection of sales tax, both property taxes out. So that sales tax at 75.9, 77.7, that includes measure Q, it includes the Bradley Burns portion. And I think there's a couple other small areas in there, I believe so. Prop 172, all these slightly other areas that small other categories that their growth percentages are a bit different than Bradley Burns to capture. Yeah, I'm sorry, just Bradley Burns. Got it. One clean category, that was our most significant one to capture. Got it, okay. Thanks for that clarification. Yeah, no problem. My second, actually my only other question is, back to the estimates for the salaries and benefits, and Alan, you did a nice job of this at goal setting. You and I talked a little bit more about that. So this does not include a COLA adjustment, right? Not after that first year. Okay, but just as a rough guide for what increases would mean, is it still true that like every 1% increase in salary and benefits would translate to very roughly like a one and a half to 2 million increase in overall budget expenditure? That gets complicated too. I was just doing some, like again, some quick back in the envelope to remind myself. Yeah, I would, if for example, we were just looking at what the county, what the county negotiated and it pops up, our salary and benefits pop up by 5%. Is it roughly like a $7 million increase to budget in terms of salary and benefits? It's, yeah, it is around that. We've done that analysis and I'm trying, unfortunately, I don't ever write with me, but there, yeah, so there's salary and there are other benefit costs that go into it. I just, for life with me, I cannot think of what that 1% general fund cost is, but it's got to figure it's right around what you're looking at or what you're talking about and I think maybe anywhere between 1 and 2 million. That's close enough. Again, I'm just trying to figure out as we hypothesize in our heads of what the negotiations are gonna be, like what that does to the estimated deficits here. And I think that's reasonable if you look at salaries alone, if that's 91 million, I mean, if you round that up to 100 million, it's gonna be a little aggressive, that's a million. And then we know it's going to affect our retirement costs. There's also other various benefits, like worker's comp and some other smaller things that are driven by salaries. So when your salary costs increase, they increase as well. So I would say one and a half is a decent estimate, one and a half million, but yeah, I know the math has been done, I just don't have it. Yeah, yeah. And this isn't the form to discuss it either. Again, looking at that five-year outlook, you did a nice job emphasizing how conservative this is and like where some of the downside risks are. So that's my question. Leslie? As you look at worker's comp costs, I know that sometimes when you have entry-level employees, the cost can be quite high around worker's compensation. Has there ever been any study done that as we raise employee wages that that reduction in worker's comp costs goes down? I would need to talk with our risk manager about that. I don't know what type of studies. There have been studies that in general about how training and wellness and things like that help bring down the cost of worker's comp to the extent of what we've actually done at the city and put that in real time with our budget I don't have an answer for that now but I can get back to you on that. This budget, but I think it's something to look at in long-term finance because it's one of those costs that sometimes we have to pay it no matter what but it can be quite extensive. I know I've said it before in budget development that worker's compensation and reducing a 1% can end up saving us hundreds and hundreds of thousands of dollars in a city this size with this many employees. So I'd like to take a look at that. The other thing that I saw was that in your services and supplies you have about a 12, almost 13% increase in costs. Is that typical or are you seeing that's just the cost of equipment and supplies going up similar to like utilities going up? So that's 13% from year one to year five overall? Yeah, so like I mentioned, the ones, the categories in there that we grow are the ones we know and the biggest factor is the vehicle costs. So our replacement fund that we have to pay to our internal service fund maintenance costs for our vehicles, gasoline, and then there are some pretty significant contracts the city has such as our Redcom contract for fire that we know we have to have that contract. It's not one that we really have any wiggle room on and we see a projection increase. So we have increased, yeah, that's, we've scrutinized these categories pretty closely and we've, as I said, we've increased the ones we know will increase and the ones we don't know for sure will increase. We try to just do 1%, 2% look at past trends. And unfortunately that usually translates to every year when we're going through budgeting, telling departments, you know, you're allowed to increase your budget in these certain categories such as your vehicle costs, but your conferences and training, your supplies, those all need to be held flat. And it's kind of what we end up doing. So one thing just to add on to that. So for example, our for the general fund budget the general fund budget for 23, 24, the upcoming one, I believe our electricity costs, we estimated a 15% increase, which may be low, but that in itself was a $600,000 increase to the budget. So, and which was one of the reasons why I didn't want to go higher than that. You may see me at mid-year saying we need to increase this budget because we've now seen that the actual, that the rates are higher or that the cost impact is going to be higher. And it's more to was really it should have been a 20, 25 plus percent increase. But I didn't want to blow open our general fund budget for something that I didn't know for sure. So those are things that we're going to, we adjust. We have the ability to adjust at mid-year and we would adjust our forecast accordingly as we get more information and those costs become a true cost and we could have more certainty in them. Are there any additional questions? Other than what is our percentage of growth when you have it on your charts? I don't know if you have like, you had a percentage of costs going out was 12%. What did you get average? What our percentage of growth is each year? I think that helps with referring to what council member stops is if we are having 1% going out for an increase with our growth. In previous years or as we go down and up in expenditures, what is our growth in tax? Oh and revenue and overall revenues. Yeah, we, I think it's like overall, what? I'm sorry, for revenue growth? Is that the question for sales tax revenue growth? Property tax, sorry, it's got this bucket saying. So two biggest buckets the year over year growth. So property tax, we're doing at 3.5%, I know and sales tax varies. I want to say it's around 3% year to year to add them together and give you a percentage we're taking. I think overall, 6.5% increase each year and if you add them together, is that how you do it or do you? There's the netting effect there. I think if you looked at overall revenues in the general fund, I think you're looking at overall probably around a 2% or 3% increase year over year. Unfortunately on the out years, in the things that we know in expenditures, our expenditures are outpacing our revenues. So we're getting to the point now where our costs are not keeping up with the revenues coming in. Hence why we try to boost our revenues and be as aggressive as prudently possible to try to keep up with the trend of our expenditures. But the reality of it is, is that our expenditure growth is outpacing our revenue growth. Which is why we have the deficit. I'm just curious what the percentages are on our growth if you have that. Go ahead. Sorry, I didn't mean to interrupt. All in, I'm just doing the quick math on the bottom of the table. From between fiscal year 23, 24 and 24, 25, it's 2.2%. But that has to factor in a lot of our categories that don't grow very much just as our miscellaneous and our transfers in and those smaller categories that don't grow very much. Our property tax and sales tax do make up about 55% and they are the ones that grow significantly but the other ones don't grow significantly. That averages out. I think about, we see, yeah, two and a half, 3% year over year. Thank you. Are you really done this too? I am. Okay. So seeing no additional questions from the committee, we'll now go to public comment on item 4.1, our third quarter budget review. If you wish to make a comment via Zoom, please raise your hand. If you are dialing in via telephone, please dial star nine to raise your hand. Zoom hosts, take it away. I see no hands raised, so we received no emails. Thank you very much. I would like to take this opportunity to thank Veronica for the presentation and thank, of course, Alan for being here today and helping us understand something that is very complex. So, but this definitely gives us an overview about where we are and where we're going to look forward to. So seeing no additional items on the agenda, are there any items that the committee would like to add or see us address future agendas? I mean, I know you're in budget development, but I think eventually looking at our first compensation raise and how we can reduce that might be something of interest for us to look at as a committee way. I might suggest our May meeting is normally May 11th. Okay, so I think we could probably skip May. You're gonna see us for two days right before that. You just had this meeting. That would bring us into June and that would be June. That would be probably June 8th. June 8th, okay. So maybe we can target June 8th and I'll talk with risk and see what we can put together in terms of workers comp to be able to come back for that. So hold that as tentative for June 8th to discuss that. And then go from there. But yeah, I'm just a quick thanks for me for adding the year over year comparison. So that was helpful. Oh, good. If we're doing that. It was insightful for us too to go, oh, and you see variances and have to dig in. So yeah, no problem. I would like to see the inner governmental line item, more specifically Rosalind and where the monies that have come in where we have spent the money and where we plan to spend the money before that money stops. Sort of to a Mr. Dewitt's comment was, I made a note of that. So I think we can get you that information. Thank you. Not in June. Okay. I won't be here. Oh, got you. Got you. I understand. And seeing no additional suggestions for our future agenda, we will now adjourn the meeting. Thank you all for being here. Everyone. Thank you. I appreciate it. You know, if you want on that, on the Rosalind thing, probably send out an FYI mention below.