09-09-25 City Council Workshop Packet

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STAFF REPORT DATE: September 9, 2025 WORKSHOP DISCUSSION AGENDA ITEM: 2026 Budget Discussion FROM: Clarissa Hadler, Finance Director CORE STRATEGIES: ☐ Vibrant, inclusive, connected community ☒ Efficient, reliable, innovative services ☒ Responsive, transparent, adaptive governance ☒ Balanced Finances now and future ☐ Managed Growth ☒ Resilient Infrastructure BACKGROUND: In preparation for adoption of the preliminary tax levy in September, this memo addresses the following information: discussion on preliminary levy, and changes after the initial 2026 Budget discussion at the August workshop. ISSUE BEFORE COUNCIL: 1) What changes, if any, should be made to the draft budgets or levy? CHANGES: Attachment 1 includes the entire General Fund Budget showing changes made after the 8/9/2025 workshop. Below are a number of points that provide brief context for changes to the proposed levy and department budgets. • Decreased General Fund Levy by $400,000. o This is not the amount by which we changed the General Fund Budget. Council direction was to utilize fund balance for one-time projects such as Comprehensive Planning and Capital-type purchases. Staff are concerned with the use of General Fund balance for projects as a practice, as city activities are often project-based, so there will be projects in many years. • Decreased Debt Service Levy by $37,669 by correcting spreadsheet formula. • Decreased Infrastructure Levy by $100,000. o Staff have been working on long-term capital planning and estimate that we would need an average of approximately $2 million per year to fully fund local road improvements. In 2025, we introduced an Infrastructure Reserve Levy to begin transitioning toward funding street improvements with cash instead of issuing debt. This levy will need to increase over time to achieve future goals of decreasing debt. It is not recommended that the Infrastructure Levy be decreased any further. o Per Council direction, staff has been revising the Infrastructure CIP to decrease costs long- term. To date we have removed tentatively developer-funded projects (Hudson and 5th St.) at the recommendation of the engineering department, removing a total of approximately $7.5 million of the initial $47.5 million in street projects. CIP Scenarios 1 and 2 (attached) show the difference between having those projects and not. These scenarios also incorporate a funding policy that uses “new cash” – any levied funds and franchise fees from the current