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STAFF REPORT DATE: August 27, 2024 TO: Mayor & Council FROM: Clarissa Hadler, Finance Director AGENDA ITEM: 2025 Budget Information – General Fund, Utility Funds and Tax Levy BACKGROUND: In preparation for adoption of the preliminary tax levy in September, this memo addresses the following information: discussion on preliminary levy, and assumptions being used to prepare the preliminary budget. ISSUE BEFORE COUNCIL: 1)What changes, if any, should be made to the draft budgets? OPERATING BUDGETS: Attachment 1 includes the entire General Fund Operating Budget and Utility Operating Budgets. Below are a number of points that provide brief context for changes within department budgets. Revenues Revenues are expected to remain largely the same as 2024 for Licenses and Permits and Charges for Services. Revenues in this area were over $1 million in 2020 and 2021, but due to the effects of a changing housing market moving toward more multifamily, revenues are lower than when single-family residential development was stronger. We are currently projecting 200 - 250 new homes, with a larger percentage of those being townhomes, which bring lower permit fees. The Council had generally expressed interest in implementing Franchise Fees on electric and gas providers earlier in the year, so we have worked those into revenue projections. The current assumption is that we would be able to raise approximately $500,000 annually, and we would be able to fully implement by March of 2025, so 2025 is prorated to 10 months. Information regarding Franchise Fees specifically can be found in the Appendices. A fiscal disparities distribution is another larger revenue of the city. This can vary significantly year-to- year. Preliminary Fiscal Disparity Distribution for 2025 are currently $ 433,937, a 11.3% increase from 2024. Total taxes for the General Fund operations budget are planned to decrease by 14%, as we shift from capital transfers out of the general fund to capital levies. Additional information on this recommendation and the overall levy is later in this memo. Salary and Benefits The 2025 preliminary budget is currently being prepared with assumptions of moving staff to the next step of the pay plan on January 1, 2025, including a proposed 3% COLA increase. For new or vacant positions, they are budgeted at the midpoint of the range. Medical benefits are budgeted to increase by 10% as we won’t receive final numbers until late-September/early-October so a contingency has been included at this point. Staff will revise by the time of final adoption in December.