City Council · 2026-04-14

Plenty of— we set aside plenty of time for Q&A. So that is on purpose. We want this to be a good discussion, essentially workshopping this subject. And of course, LRB does have a bunch of, you know, slides and data to present and go over. But they also have the spreadsheets that back up this data, and they And they can take us through an interactive process too, if you want to dive deeper onto any particular item that they share with us.

All right, thank you. I do need to mention we need to excuse Councilmember Kilpatrick. He will not be here today, but everyone else is here. All right, Lauren, Fred, are you ready?

I am ready. Will you—

All right, welcome.

Will you be able to see my screen if I share it?

Well, that's a good question.

We will find out.

Share.

It's in progress.

Then request.

Okay.

Multiple presenters can share. All right. Can you see my screen now?

Yes.

No, that's not the—

that's not the—

It should say City of Orem Property Tax Discussion.

Oh, yes, yes, yes.

Excellent. Okay. So no budget or finance discussion would be complete without a discussion of property taxes, right? I'm sure you were all thinking that. First of all, thank you for allowing Fred and I to, you know, continue to work with the city in this capacity. Orem has been a client of mine since I was as green as grass in this industry, even before I started LRB. So the part of my heart and soul is in Orem, and my kids can tell you, as I— as we drive through the city and come to events, I'm like, oh, we financed that, I financed that. Every time I meet someone new, I'm like, what city are you from? And I tell them, oh, we financed the rec center, and people were raving about it, by the way.

So.

We love working with you and appreciate the opportunity. So, one of the— and I want to thank you for allowing me. I think in Brent's ideal world, I would not be coming first with the, you know, hit him out of the chute with a property tax discussion. But I have a doctor's appointment this afternoon that I really, really did not want to cancel. And so we've reorganized things a little bit differently. So this is probably the least fun part of the discussion, and that is about property taxes. We've had some of this discussion before at your retreat. I have pared it down, but just want to remind everyone, you know, some of the things that you need to be cognizant of, as well as the very unfortunate fact that the legislature decided in their Infinite wisdom to make some changes to, you know, what you have to do if you are going to seek to raise your property taxes. I could pontificate for hours about how angry and frustrated I am about what they've jumped up, but nonetheless, we all have to comply with it. But I'll talk about it here a little while later. So again, by way of reminder, property tax process in Utah is designed so that you have substantially the same dollar revenue from year to year, regardless of whether or not property values of existing structures is going up or down. It's designed on a collective basis. So, you know, if a, you know, a neighbor does a big remodel and the other one's house partly falls down. It really is on a global basis of the taxable value in the city, and the tax rate will generally adjust downward unless the local government, you know, takes action, as I would implore you again to strongly consider, even under the new rules that are being imposed. Because the property tax rate, as shown here, does not account for inflationary increases that you get on the expense side. It's like saying, okay, your allowance in, you know, let's see, when was I 10 and buying candy? Your allowance in the 1970s is, you know, $5, and your allowance today is $5. Now go and buy the same fill-in-the-blank candy bar, comic book, whatever it was. I couldn't do that with $5 today. But that is what our property tax structure is, is set up to do. I have heard people say that when the legislation was initially put in place to hold the revenues level that they wanted, you know, they did it so that governments would be transparent and people would know that you're raising the rate. And what has happened with many, many cities is what Orem has done. They just let the rate—

Mm-hmm.

Fall, fall, fall, fall, fall. And, you know, except for new construction, you don't really get to capture any additional revenues. So this graph, this is Orem City's tax rate from 2016 to today. What I want you to really think about— well, I'll talk about some of the reasons why— is, you know, seeking to maintain You know, the, the rate so that you can capture some of what you need to in, in terms of inflationary costs. So here we go. This graph. So again, I'm gonna go back here. This is a property tax rate goes down, down, down, down because your taxable value is going up as new, new construction occurs. This graph shows property tax revenues increasing. And so you might say, well, Laura, rates gone down, but look, we're— we, you know, we were collecting $10 million back in 2015, and we're now maybe at $11 and change, whatever that is. But you've got to remember that you're capturing that because of this growth in— the growth in revenues is tied to new construction. So you do get to capture, oh, you know, XYZ business built a new office building. You do get to capture that when that, that tax rate's being set because it comes with a need to provide additional services. You build a new, you know, someone built a new Walmart. Yeah, you get the value, but you also get, oh, we're going to have to police that for shoplifting or whatever calls you have to go out there. So as the city is nearing or at build-out, I mean, you probably, you know, starting to see some vertical, you know, stacked construction. But as you are nearing build-out, relying on property tax revenue from new growth, it's just not sustainable. Again, Fred's going to talk to you about sustainability planning. And if you're trying to rely on, you know, new growth New Woodbury developments, new carved lots, whatever. It's just not sustainable when you, A, have added expenses when new businesses come in and new homes come in, and you have added a reduced, you know, total revenues. So I'm gonna jump back to this one here.

My—

Good evening.

beat the horse dead here. The goal is to maintain, in my opinion, the goal of cities should seek to at least maintain, increase if and where necessary above your, you know, current certified rate, but to at least maintain your current certified rate. So again, I showed this at your retreat. I'll do it very quickly here so that you can see cities that have gone through the process to increase their rate. So anything where it's green A city has gone through a process to increase their rate above the previous year's certified rate, because unless they've had no growth and no increase in property values, which that hasn't happened in a long time, these rates just naturally fall. Like, you know, yours down here in bold and Salem's just— they just keep naturally falling. This shows a 3-year average of these selected cities in Utah County. And of those that we've selected, and granted, I will say, you know, Vineyard is the high tax rate in Utah County because something like 75% of their property is in an RDA. So they're really only capturing their real full property tax off of, you know, 25% of the city and then the share share they get from the RDA. But, you know, your tax rate is, is very, very low. I know that if you seek to raise tax rates, people generally come with their pitchforks and all the anger that they can muster. And I know if you choose to go ahead with that, I'm happy to participate in education of citizens because I don't think your average citizen understands this. I think your average citizen would say, well, my taxes go up every year, and that may be, but they haven't gone up every year because of Orem, right? If their house used to be worth $300,000 and it's now worth $500,000, and you used to collect $300, and their house is now worth $500,000, you're still collecting the same old $300 from them. School district may have increased, county may have increased, water district may have increased, so their total tax bill may have increased. But Orem's not getting any of that. So had you held— so let's go back here, 2019, the tax rate 0.01260. Stick with me here. That was clear back here in 2019. Had you maintained that tax rate just every year, readopt, you know, to bring it up to that flat, a flat tax rate. the city would be collecting $5 million more a year than it is today. So this is, my opinion, is like your lost buying power because things are still more and more expensive. Something else you need to think about in terms of, you know, your revenue mix as you're thinking about, you know, property tax increases is your property tax revenues as a portion of the whole of Orem's revenues has continued to decline. Continued to dwindle. It used to be, you know, rounded, we'll call it 49%, rounded here. Oh no, sorry, reading sales tax. Rounded here, 21%. Rounded here, property taxes now make up about 17%. And that decline in how much property tax revenues are making up of your total revenue mix is important from a stability perspective. So you think about you as a government, what can you control and what can't you control? You can't control prices of, you know, goods. You can't control, you know, you can't make people shop. You can't make them buy expensive steaks if they want to buy hot dogs. So this property tax is kind of the only thing that you can rely on. It's what's, you know, consistent that you can to a very large degree control because you can control the rate. So as this, the property tax has declined as a percentage of your total, it should be frankly of a concern to you in, in terms of being able to maintain the level of service that you have provided in the past. So I will tell you, it is a concern rating agencies and investors because their first question when you're this this reliant on sales tax, you know, 48, 49%, is what's going to happen in a recession. I mean, they all stress it back to the '08, '09, you know, whatever they call that wasn't a recession, the almost recession. They all, you know, put that in as their stress case scenario when we go to get a rating. And they know that sales tax revenues will decline in a recession. Again, we talked about, you know, the city needing to be mindful of what you can and can't control, and you can control the property tax rate. So I know because I've, you know, been in many city council meetings when they've, you know, wanted to raise taxes. And what do citizens say? Well, cut expenses, cut expenses. And then we start saying, okay, well, what services don't you want? Do you want less police? Do you want less fire? No, no, no, we'll pick some— mow the parks less often or something like that, right? So there is a practical limit to how you can control expenses. And most everybody kind of conveniently forgets that most local governments— so this, this is true of you, of South Jordan, of Ogden, whoever. Most local governments' budgets, their general fund budgets, about 65 to 75% generally is made up of salaries, wages, and benefits. So, you know, these idea of cutting, you know, of non-salary items like, oh, we will, you know, not put new light bulbs in the library or whatever, right? So it's not a salary. We'll really find ways to save on whatever, you know, is a non-salary thing. Chances are they're not— those things are not going to move the needle much, I believe, because Orem has seen that, you know, not very large increase in your property tax revenues, even added, you know, citizens and businesses that you need to serve. I think Orem squeezed about as much blood out of the turnip historically as it can. without cutting salaries and wages, which will have a direct impact on your service levels, whether that's again police, fire, crossing guards. I mean, I don't know what it would be, but it's when you start talking about that to citizens of, okay, are you okay with, you know, 10 less officers a year? Because great, there's a, there's a good cut for us, right? So you need to be mindful of if, if the push is going to be, oh, we've got to tighten our belts some more, we got to get more efficient. that what it's really going to come down to is what services do you want to cut staff from? From March of '25 to March of '26, CPI has gone up by 3.3%. The next release won't occur until almost the middle of May. The index for energy has risen, as you can all imagine, because you go to the gas station and buy gas, by 10.9%, which was largely driven by This 21.2% increase in the index for gasoline. And when you think about that from a city's perspective, think about every vehicle that's a city vehicle that is rolling on your streets— police, fire, roads maintenance, sweepers. I can, you know, whatever, those trucks that vacuum out the sewers, they all use gas. And this year that's going to go up a lot. Right? So back to, okay, what can we and can't we control? Can you cut those costs? Not without cutting services, right? From December of last year to December '24, December '25, wages increased by 3.4%, which is slightly higher than even CPI. I'm going to get on my soapbox just a little bit.

Mm-hmm.

Related to the state. One of my huge frustrations, um, when Big Brother State comes in and says, oh, you city have to do your property tax increase this way because, you know, we get complaints from citizens, they don't like property taxes. Well, the state doesn't have to deal with what you deal with related to that falling revenue source.

Yeah.

So 2 of the largest revenues to the state are sales tax, which you benefit from. Think about poor school districts that don't get that, right? You at least benefit from when prices go up, people pay more, and you collect more sales tax until prices go up too high and they quit shopping. The state benefits from income taxes, which should be top of mind for all of us since they're due tomorrow. So as inflation goes along, so those, you know, 3.4% a year and 5% and 9% when it was really bad, right? What that does is it drives salary increases. I earn more money. I pay more income tax. So their revenue streams are a little bit more directly tied to capture the benefits, you know, of inflation. Where your property tax is not. It ignores inflation entirely. That's why I really, really hate when they come down with the, you have to do it this way, because they don't do anything like that. Okay, off my soapbox. Okay, now we'll look at the ability and willingness to raise revenues when necessary, except for property tax rates. All other rates, sales, franchise fees, everything else that you can, you can control is at the maximum rate. Your sales tax is at the maximum rate, your franchise fee rate's at the maximum rate. So again, you don't have any ability to say, oh, we're just going to put on a new sales tax. I do some work in Arizona and they do have that ability. And it's sometimes a very wackadoo tax structure. I mean, they, there's like 30 different items, and each of them have a different sales tax. It's really wild. I don't know how they control it, but in Utah you don't have that. So the only element that you can really control is that property tax rate. Okay, so the recent legislation is— are these 2 House bill and Senate bills. And I've put in here, again, it's not anything you as, you know, city council will need to go, oh, we've got to do this on You know, June 27th. I mean, it's something your, you know, great staff and recorder will take care of. But if you're going to seek to raise property taxes, there are certain deadlines that you have to give notice to the county auditor and tax commission. You have to, you know, receive whatever the certified tax rate is going to be. You know, if you don't do anything, we don't have that yet. Then if you're going to seek to adopt a new rate, you have to put a notice of hearing out. They put some new requirements in, in that regard. Has to be at least 10 days after this notice evaluation, at least 14 days before the hearing. You have to hold the tax increase hearing, and no other general business meetings of the city can be held the same day. So you can't say, oh, we need to take action on You know, fixing whatever the part. Nope, you will hold the hearing on taxes. It has to be at 6 PM or later. You have to allow for reasonable time for people to stand up and respond without limiting them too much, because then they feel like that's unfair. And you have to do all of that before September 1st, and then within 7 days after you do adopt a new rate, you have to notify the state. the state and the county. So these requirements down here are some of the things that I'm really dialed up about. I won't pontificate anymore, but you have to state that you're considering a tax rate. That doesn't give me any concern. The approximate dollar amount of the revenue increase doesn't give me any, you know, great concern. Percentage public hearing. And this is the one that I just want to go berserko over. For each department of the city whose budget would be affected by this, you have to outline the budget increase or decrease to the department and articulate the operational impact to the department if the city approves or does not approve the increase. So in the olden days, in 2025, you could have said we are going to increase our tax rate by 5%. That'll generate rate, whatever, you know, dollars. I'm making up a number, half a million dollars. And that just, you know, you hold the hearings, people come complain, but you now have that money. You know, if it gets approved, that money will then come into your general fund without having to effectively— I mean, line iteming is a little bit of an overstretch, but it's almost— I mean, Brandon's going to have to, you know, put forth what you're going to do with this money. And the state has made it amply clear that they intend to follow up and make sure that that's reflected in your budgets and your, your actual audits at the end of the year. I think it's crazy and unfair, but nonetheless, that's what they're doing. You have certain advertising requirements similar to what we've talked about before. It has to be on your website, has to be published in utahlegals.com. And I did note that the GO bond rate will not be— will still not be included in the percentage increase. That seems to be one, one little nice small bone that they, they threw to you. So the recent legislation does require the— that you identify the need and use of those revenues. And, you know, just to bring it home, I think the best practice for the city is to seek to maintain your current tax rate and identify how you're going to do that. They don't really limit it. I think you could say, you know, what we're going to do is we're going to identify this to help us cover for Costs of inflation on health insurance or gasoline, whatever. The challenge is then, you know, Brandon and your finance staff have to be able to figure out how to document that. So there you go. Any questions related to taxes specifically? I'll be turning it over to Fred to really get into the meat of the financial sustainability plan. Again, the model is such that, you know, he can You know, adjust it. You can do the, the what-ifs. What if we, you know, lose 10 police officers? What if we add 10 police officers? You know, within some limits, he can show you how, what those impacts will be.

Thank you, Council. Do you have any questions for Laura about what she's presented?

Just, are we going to have access to these documents sometime soon?

So that presentation I already have, so I can send that out today.

That would be good. Thank you, Laura.

Can I ask a question?

Yes.

Hey, Laura, can you hear me?

Yep.

In that legislation, as it was going through the different revisions, and we were attending LPC, and, and they were viewing those with us, there was conversation about remodeling being counted as new growth. Did that end up in the final version? Do you know anything about that?

I don't know, but I could certainly find out. In my opinion, it should have already been being counted that way. But I will, I will find out. As, as someone who has remodeled my home now twice, you know, time will tell because I don't have this year's tax notice yet. But when I remodeled my house the first time, I mean, I go through the proper channels. I hire a contractor, we get building permits, with the city. And when I did my first remodel, they didn't pick up any of it. I mean, they didn't know whether I'd spent $100,000 or 10 cents.

So, in our finance conference the other day, my understanding from that was if any remodel expands the square footage of the home, that would count. If it is remodeling within the existing square footage of the structure, it would not.

So where we're at a position where we will— we're seeing revitalization. I mean, quite frankly, my whole neighborhood got new roofs and new siding from that hailstorm. So is this something that would be beneficial for us to then approach our legislators in order to help our budgeting, our piece of the pie?

Certainly would, as my understanding of what would count towards an improvement to the home and obviously change its value, which again, it's all just a change in value. And so that would count as new if we can get that to count as new growth. I think that is their logic is that's not new growth, right? That's simply keeping what is already there. There. So I think that's their argument, and that would probably end up being a tough uphill battle. So I'll be honest, I do sort of understand what they were saying as far as, obviously, if you're adding square footage to the structure, you're adding growth to that particular value. So value in and of itself, how you own it above what that base is, right? Because Just changing the value doesn't really— it only matters to that one taxpayer. It doesn't affect us in the total.

So if we— I mean, to me, we should join with other legacy communities and get credit as we're built out. You know, maybe we don't want to go up. Maybe we're where we are and we're happy here and we will pay for what we have. But as people improve and keep our community vibrant, I would think we would— should be rewarded by that. Um, here's my question though. When did they change this? Remind me that year that we could have the stable budgets.

That's been that way.

Has it been a really long time?

Yeah, a long, long time where they set— they fixed so that you had the same dollar amount of revenue coming in. That's why your tax rate declines as total property values increase. So again, my home goes from you know, $500,000 to $600,000, just because the market's gotten better, you, the city, school district, county, none of you will get any benefit from me off of that $100,000 in increased value. Because what will happen is the tax rate adjusts down so that in total you collect the same dollar amount that you did the previous year.

Based on the budget we submit, correct? Or based—

we don't submit, they, they tell us, they dictate to you.

Yes. Does the school district submit a budget?

The school district goes in and sets— the county tells them, this is what your certified tax rate is. Do you want to go through TNT and change that certified tax rate? Okay, up or down. Obviously, it rarely goes down.

So maybe it's a good time to have that conversation. As the environment in our cities, especially us on the— in the foot of the mountains, has changed. Do we have those kind of conversations with our legislators?

This would be—

I get it, it's an uphill thing, but maybe those conversations— we should start those conversations if we want to be seen as being different right now. We're not the high growth anymore. We're just not going to get there. Because we're built out. Maybe our state needs to respond, come up with ways to respond to communities on the foothills of the mountains that are the legacy communities here.

I disagree.

Thank you. Okay, thank you.

I'll answer questions, Council. All right, turn it over to you.

Thank you.

One other element to consider is you're talking about discussions with legislators, policymakers, is the perspective of those policies. So the certified tax rate calculation, truth in taxation process is a way to do that, to address fluctuations in valuations and revenue generation. But I would argue from the perspective of the legislature, it's a proactive or tax protective approach, meaning you as a legislative body have to take action versus what you're describing, which is an automatic adjustment potentially based on appreciation of property. So depending on your perspective, those could be, you know, those perspectives could be good or bad, right, on what tool you use here. But as Laura was describing, there is protection for you as an entity in that you don't lose revenue. You just don't gain revenue other than new growth. So you're not going to see the benefit of appreciation, but you don't suffer depreciation.

And in a way we do because of inflation, right? That was her point that she was making.

Exactly.

Yep.

So, well, I have some slides that will highlight that a little bit more, and then we'll talk about our purpose relative to this model. We'll go through the modeling assumptions that I've baked into this, and it's a large spreadsheet that we bring everything together relative to revenues and expenses, and I can show you that. Then we'll talk about the baseline scenario, and this is where, you know, graphs are a little scary, and this is typically the outcome when we look at these factors and inflationary pressures and level of service changes. Then we'll talk about what tools we have to use in the context of this model. And then we can play around with those scenarios if we— if you'd like to, or if you want to just talk high-level scenarios that you'd like me to go work through with staff, we can, we can do that as well. Alrighty. Our purpose again is addressing sustainability, and how we evaluate sustainability is from these 3 metrics here. We look at— well, sustainability is a reflection of efficiency. Or cost reduction and/or revenue generation. Our model focuses on this last element, which is revenue generation, but we look to staff department heads to help us understand the first 2 buckets, which is efficiency— how efficient— and the levels of service and resources that we manage. And has there been any cost reduction or future cost reduction that we can program into the model?

So—

for instance, is we may receive input for a specific budget line item that says we think that cost could go down over time because of X, Y, and Z, and we can program that into the model. And into this exercise, we're always balancing specificity with ease of administration, right? So these models can get very complex, and so we have to balance that, determine what are the primary drivers in this exercise, what can be assumed away, what do we need to focus on, So while we have assumptions and we've programmed a model, that can be manipulated. We could say, well, we think we need to adjust something here, and we can build that into the model. So there's a lot of flexibility on how we build this and what areas we focus on. But again, I want to highlight that our model, when we look at sustainability, the efficiency and cost reduction often come to us as inputs or feedback from staff, and then we're manipulating the model to determine how much revenue do we need to to mitigate any shortfalls, or do we go back to efficiency and cost reduction and change the assumptions to get us to where we need to be? So this is the process that we go through. We look at historic budget data and information that we receive from staff. That is the foundation for the model. We then meet with department heads to discuss unfunded needs, level of service issues, changes in those expenditure line items, trends that may exist, and how we might want to interpret those trends. That allows us to create a baseline model that we then go back and review those assumptions with staff, say, okay, here's what we thought you said, is that what you actually said? And help us review all the spreadsheets here in this, in this model. We then recalibrate the model based on that input, and then we work towards adoption. We can also have a circular equation in this, in that we get to the recalibration of the model, and we have to go back to staff and say, hey, this isn't looking like what it should look like, and we get your input. And legislative directive may say, hey, go back to the drawing board, you need to fix all of this. I don't know, however you need to do that, just fix it kind of thing. So there can be a circular equation in this. It's not perfectly linear that once we get to finalization, then it's done. In addition, entities will review this on an annual basis or every couple of years to make sure that they're accounting for changes in assumptions. Alrighty, so again, we look at historic— we're focused on the general fund here. This is an exercise that is similar to when you've evaluated your utility rates, essentially determining what our historic general fund revenues and expenditures look like, what's our taxable value trends, what do our property tax revenues look like, and other revenues. revenues, and then we make projections with that inflationary component and say, okay, let's program inflation rather than looking at a singular year as it relates to budgeting. What happens if we push that out several years, and what does the trend line look like? As I mentioned, we also then collect new or unfunded mandates from a department head perspective. So this is essentially saying, Tell us what you need that's over and above the existing budget line item expense. So that may be an addition to an existing expenditure line item, or it may be an altogether new expense that doesn't exist in the budget. We get all of that from department heads, and there's a lot of, again, information that goes in the spreadsheet that we summarize and then add it to this model. So that's layered on top of that inflationary variable. So that's another metric that we need to think about when we talk about sustainability. Laura really stressed on inflationary pressure, but these unfunded mandates, level of service changes, are also a pressure point that is applied when you talk about the general fund and how do we manage that. So our model pulls that in. We isolate that as a separate expense line item so that we can see what that's doing, and we can also turn it off. In total if we need to or want to. Uh, so then we look at, uh, deficits in the model, saying, okay, what happens, uh, when we apply all of this data, the projections on revenue and expenses and our other elements within the budget? And then we go through the decision-making process. What do we do about it? Go again, going back to the elements of sustainability. Do we become more efficient, reduce costs, or do we raise revenue, or do we do something A little bit of all of that, right? And that's typically what needs to happen. Alrighty, so we've highlighted this again, changes in revenue. We've talked about your issues that as you become a built-out community, your revenue trends might change as you look to the future. So the idea of sales tax revenue continuing to grow at a certain percentage may not be realistic, or you may not want to count on that revenue line item. So the fluctuations in revenue are an item that we need to think about. Laura touched on inflation. Right now we're— while we experienced some high inflation in previous years, that cooled off, and then we're now seeing some inflationary pressure as a result of national issues that are affecting some key metrics of inflation. So that could pick back up. You can see inflation becoming more pronounced. The one-time expenses, and then those level of service issues are all these elements that we're feeding into the model. And we talk about level of service issues. This can be a positive or a debit or a credit into this model, right? We could say, hey, we're gonna pull back on a level of service, meaning we don't want to— we don't want to provide that high of a level of service, which would result in an expenditure decrease. Or we may say, We actually want to do more than what we're providing, in which case we're adding to that cost line item. Or they may say, when we visited with staff, said if we want to just keep what we have, this is what we think we need with regards to new or additional expense. So that's that bucket. Alrighty, any questions on that? I don't want to— Keep chugging along without opportunities to speak, to have dialogue. Any feedback there? A lot of it's stuff we've discussed, but—

Thank you.

Alrighty, so let's start talking about some of the specifics of this model. We've used 2019 through 2024 actuals that we pulled from your budget documents. So every year when Brandon's working through the budget documents, there's information relative to historic actuals that are provided as part of that. So we look back and get all that information and bring it into the model. In that process, there's obviously changes over time relative to reporting, how you budget, the software used for budgeting, and that creates some challenges as we aggregate data and put it into this model. We've done our best to account for that with Brandon's help, say what, what should be in this model as we focus on the general fund alone. There's— there are transfers that go out of the general fund, enterprise funds that are all providing services. We're focused on the general fund and what it provides and pushing everything else away from the model. We're bringing in 2025 projected actuals and our 2026 budget numbers. We then project that through 2041, but we focus on a 5-year planning horizon when it comes to actual policy discussion. And that's really based on the fact that, you know, as you go farther and farther along in time relative to our understanding of assumptions, that gets murkier and murkier, right? Our crystal ball is just going to get really foggy as you get too far out there. So we don't want to necessarily make policy decisions based on those out-years, but it does help us understand trends and say, okay, for example, if we had a huge capital investment that was coming in, we could program that in the model and see if we want to make any policy decisions now to help mitigate that issue. I'm working with several solid waste utility or solid waste districts, and they have some some of this issue where their closure, their— the closure of those facilities are happening in 2039, 2040. So they want to start thinking about how they plan for that now, making incremental changes rather than huge changes when we get to 2035, for example. So the other thing I wanted to highlight here is the model is based off budgeted figures. So in any budgeting process, Across the state of Utah, there is an exercise to ensure that you're— to be conservative. We may under-project revenues a little bit and over-project expenses a little bit, right? So that when we get to reality, we don't get into trouble.

Well, that—

this model perpetuates that, right? We're taking your budgeted figures and applying assumptions to those figures and then adding all those other elements that we discussed relative to level of service, inflation. and unfunded mandates on top of that. So that's something to think about as we talk about impacts and the trends within the general fund. In addition, we start with a $25 million fund balance of— this is unrestricted funds that we're saying, hey, this is available to do with what we will relative to dedicating it. You could dedicate it to operations, which we don't typically recommend. You can fund capital improvements, whatever. It's unrestricted. So that's our starting point. That's what we're going to measure against, our yardstick, when we look at the trend of our cash at the, you know, at the end of each fiscal year. We've also assumed that there would be a tough administrative contribution. We know that's not finalized, but we did make some assumptions relative There's some revenue that might come into the mall relative to that, starting off at about $250,000 and then getting up to $500,000 in year 5. As that becomes more refined, then we can make assumptions, or you can make assumptions.

Tough.

I'm sorry, transportation utility fee.

Okay, thank you.

So you've probably noticed with the legislature that there's been a concentration on this element relative to what you can and cannot do. And in this legislative session, they, they clearly articulated what you can do with the transportation utility fee and put some very detailed guardrails on that, which I think is very beneficial. So, so it can be used as a resource within those parameters. So many entities are going through the transportation utility fee exercise and wanting to establish that fee. We're also continuing the transfer assumptions relative to what goes out of the general fund, for example, debt service. We're perpetuating those transfers and saying, hey, yeah, the general fund's going to keep doing that. But we did not do an analysis of those other funds. So we're perpetuating existing trends. And with Brandon's input and Brent's input on what we want to assume relative to those transfers, just to make sure that we're accounting for that. But you could have, for example, an analysis of subfunds that say, hey, we need to transfer more out of the general fund if we want to keep that sustainable. That has not been done here. So we're isolating it to the general fund and the services that are covered in the general fund. And then our target relative to our fund balances we're trying to see to achieve 25% of our revenues as our target. Whatever we collect in general fund revenues, take 25% of that, and that's what we carry over as a fund balance, which has been reduced. Uh, previously it was 35%. That was pared back to say, hey, no, maybe that's a little too much, so let's, let's look at 25% as a, as a target there.

Fred, this is to clarify, unrestricted fund balance is part of Rainy day funds.

Yeah, so again, that's something you keep to— some entities will use it for budgeting stabilization. For example, if we had an event like COVID where there's substantial challenges relative to revenues and expenses, you call— you draw on that fund balance to get you through that without taking dramatic action in period of crisis, or we could have a substantial capital investment that the general fund needs to contribute to and pull from that. But we reserve it for those unknowns, that rainy day fund, and to keep that in place. Another benefit is that also provides you some benefit when you go to issue debt and you speak with rating agencies and those types of entities. They'll look at what you have relative to your general fund balance. Say, is that a positive or a negative? Do you have enough there relative to what you need? And that would influence your borrowing cost if you were to utilize the general fund. Now, that's a little different because you have multiple revenue resources within your general fund, like sales tax revenues versus property tax. So there's a lot of nuance there, but that's also a benefit to that rainy day fund.

And Fred, if I can just clarify for the benefit of the council, We'll be talking a little bit more about Transportation Utilities Fund and process and study. Chris will be talking about that a little bit later. That being said, wanted to make sure that you were aware that it was included in this study, essentially to show that we tried to think about this as comprehensively as possible.

We talked about impact fees earlier.

Is that included in that as well, or is that Impact fees might be addressed here.

So what we're isolating in this analysis is the general fund portion of those projects. So if we had a one-time investment that's required, we'd account for impact fees. That was covering 50% or 80% of the project. Let's shave off that cost, exclude it, and only include the remaining percentage in the general fund analysis. So that's an example of something isolated.

So, as an example, our expansion of the police station here and the remodel here, we take whatever we can from police impact fees to contribute towards it. But obviously, the bulk of it is covered from our general fund revenues. So that's the portion that was taken into account in this study.

Alrighty, so here's a lot of numbers. What this is highlighting is the assumptions and how we pull that into our model. So this is showing in our model the specific line items that we have identified relative to the revenues that come into the model and the expenses. So the expenses we've highlighted down at the bottom here, but for the majority of the revenues, we're assuming no growth. We're saying, okay, they're not really going to grow. We are going to assume some growth, for example, in sales tax revenue. If you recall back to Laura's slides, and I'll show you another slide, that is a big chunk of the revenue you receive. And so changes in that line item have a huge impact in your sustainability. What we saw with regards to sales tax revenues is historically you've had a higher growth here than 3%. But when you look at the last 2 years of actuals, you're seeing— we're seeing a plateau of that where you could have an instance where sales tax revenues are not growing. Even the 3% may be aggressive, right? That you get to essentially your limit, the public's limit relative to buying spending, and you're not going to see as much growth there unless there's Redevelopment, economic development changes, those types of things.

Ask a stupid question. So food places, food joints, restaurants, everything, do we get sales tax or do we get the, um, tourism whatever tax?

You do get sales tax, and on some businesses you get both. You'd have a tourism tax on top of that. Um, but yes, all of, all of your eating establishments, that goes in our—

I guess that— I mean, that goes in our general fund.

That's—

we do not receive that Okay, you don't receive the, the one extra 1% restaurant tax. You don't get that.

Okay, we don't.

We do get 1% sales tax, right? Yes.

Okay, so there's a sales tax portion of that component.

We get 1% in our general fund and 1% in the—

I believe it goes to the county.

Yes, to the county.

That's the one that we don't typically get back what we put in, right?

Yes.

Can you tell us what that— you talked about that plateau for sales tax revenue over the last couple of years. What does that actually look like? What does that mean for us? It means we didn't get 7%. That means we got 3%. It means we got 1%.

So yeah, let me see what our—

I don't need specifics, just like general trend.

One was negative.

You say one?

I remember if that was '24 or '25. Um, let me say it was '24. I mean, last year, I want to say it was negative last year.

And it's December to December.

Yes, '24. So '23 actuals, you were at $32 million, and then '24 actuals, you were $300,000 less than that. So you went from, from 2022, '23, and '24, you hovered around $31.7 to $32 million. So actually 3 years of flat really no growth in sales tax revenues. Now, prior to that, so when you look at 2019 actuals, you were at $22.7 million taxable sales. And so you, you did grow when you, when you went from 2019 to 2021 and then to 2022. Yes, we were growing. Then 2022 hits and you did not see really any growth in taxable sales through '24 actuals. And then we budgeted to be consistent at about $32 million in sales tax revenues. And the same with '26. We just did a slight increase in sales tax, but really no growth. So we're programming 3% to the model, which could be aggressive. It could be that you again plateau and have no growth in taxable sales, or 1%, you know, that we see this, this grow.

Okay.

So what that highlights, again, when I do these types of studies, because there's so many moving parts in a general fund, so many services that you're providing, the key to me is identifying where does our risk lie? What factors are we relying on? And is there a risk? And is it substantial? Is it minimal? Do we want to do anything about that? Because I'm going to show you slides that are really scary, right, relative these benchmarks, but that's really intended to help us say, what are the risks we're trying to mitigate here? What are the factors influencing sustainability and how do we tackle those problems? We're not going to tackle everything all at once, but there's action that we can take to help create sustainability and reduce risk in our model. And that's how I view it. Again, like any investment portfolio, Our objective is to say, how do we reduce risk and are— what are those risk factors and do we want to take action? So, all righty. Um, okay, so here we've, uh, again, our primary assumption has to do with sales tax revenues. The other revenues we're keeping pretty constant. Um, again, there are fluctuations that we've seen, um, and we can play around with those, but Franchise tax is in a similar boat here where, um, you're likely hitting a plateau, and we're accounting for that in this, in this instance. Um, and then on the property tax, that, that top line item where we've seen where we show new property tax revenues, that, that's not a reflection of new growth. That's going to happen naturally, right? So our model accounts for an assumption within The valuation calculation that assumes some new growth every year. You get a little bit of new growth in your taxable value. What this is saying is, over and above that, are we going to assume any increase to our revenue generation? Meaning we're going to change our certified tax rate to generate more revenue than what the— or the truth in taxation and certified tax rate process would allow. That's that line. So what we're saying, no, we're— the baseline is do nothing with property tax except let, let it grow naturally. Let's add some revenue with regards to sales tax. And then now let's start looking at our expenses. So down here at the bottom, we've isolated some specific variables that we wanted to manipulate. So for personnel, for example, we're applying a 5% inflationary assumption, which is higher than the CPI that Laura referred to. That hovers around 3% to 3.5%. If you look at other cost indices like a municipal cost index or a construction cost index, those are similar. We see about a 3% to 3.5%. Maybe the construction cost index is a little bit higher. Those are national trends. When you look locally, your construction cost index can be higher than that. But here what we're saying is we assume that this specific line item is going to grow at a higher rate than general inflation, which is typical. Usually personnel, there is higher pressure, and that's driven by not only salary costs but the cost of benefits over time. That just gets more costly. There's just a lot of pressure there. Then we have assumptions relative to public safety, our sworn officers. This is information provided by staff hey, that's going to— in order to keep up with the market and pressure to retain officers and keep the level of service, there's a need to have a higher growth on that side. This is also fairly common. I've been in many meetings with entities where one of their primary fears is just losing officers and firefighters to other locations, essentially training them, and then letting them go somewhere else where they get more money. There's just a lot of pressure there relative to that service operation. We also had input relative to legal to have a little bit higher growth on that side. So you can see here, based on input, we're able to isolate specific line items and apply an inflationary pressure. And then generally speaking, outside of those specifics, we apply again that 3% operational expenditure growth. So any line item that wasn't specifically identified, we apply just that general inflationary number and grow that. So those are the assumptions there as it relates to this.

Yeah.

Just before we move on too far from revenue assumptions, could you or Brannon speak to the Utopia rebate figure, which is 7% in there?

Yes.

I mean, I'm not gonna— Yeah, so that basically Utopia has grown and captured more of the market, and their infrastructure is going past essentially all the addresses within its member cities now. And so that percentage that we assumed in there has been based off of conversations with Utopia and And really kind of looking at the last handful of years, they've increased what they paid back to the city. So the city still pays more towards the Utopia debt than we receive. I think that net negative is about roughly around $2.5 million a year. But every indication we get from Utopia and Roger Timmerman, the director there, is that That things are looking like they will continue to narrow that gap every year until— Well, right now they're saying that they think that they'll be able to fully cover that debt impact by about the time that their debt falls off, but they're also keeping on their books that liability, so they'll continue to pay us back The current falls off 2039, right?

And so— 2040.

Okay, 2040, or fiscal '24.

Oh yes, fiscal '24.

There's a moment in time where the amount we pay and the amount we get back break even.

Break even.

And then we start receiving more money.

And about what year do we think that's going to be?

Break even?

They say no later than 2040, but I've heard, I've heard of projections as aggressive as in about 7 years. So it just depends if their projections are aggressive or not, and/or if they just stay on the trend that they have been for the last And full years.

So with the 7%, that we're just putting that assumption in the model, but that 7% is off of $2.5 million.

So we said growth, it's growth of what we receive, which I think we're at about $1 million or $1.1 million.

I do have a slide on that in my presentation.

I just wanted to get the scale. We're talking about less than $100,000.

Yes.

Yeah, I show your rebate is $1.1 million. And then it grows to 1.5 within the 5-year window based on that 7% increase. Whereas if I look at the— see our transfer, is that— would that be the offsetting cost, Utopia Pledge transfer?

It's like 3.3.

Yeah, it goes up.

Yes.

Yep.

So we have it at 3.6 in the '26 budget. And that grows only by 2%. So within the 5 years, there's—

it's a small number. And there's—

yes, percentage looks big, numbers not as small.

And it's nothing but— I mean, it can— it's only going to get better, hopefully.

Yes.

So, yeah, every—

again, because they're going in front of every address now where before they weren't, their market is bigger. And they've been, even with that, increasing their market capture from year to year, and they're right at about 40% of Orem residents use the Utopia fiber network.

Sorry to back you up. If there was anything else on—

I did have a question.

Oh, yes.

Yep.

Just on the senior citizens operational expenditure, that's a— why is it 10%? Can you just help us understand that a little bit?

Through my notes. So usually this is just to get input from staff on if they felt we needed to have more increase than just inflation increase to maintain the level of service that is provided. So essentially saying, We're already too skinny, and we need more than just 3% in our expense growth rate. Uh, so that's where we would have applied that, say, hey, okay, let's program that 10%. So our questions to staff would center on, um, really those buckets of, of impact, saying, okay, is inflationary pressure sufficient for what you're providing? And if they said yes, then we'd apply the 3%. If they said no, in this case senior citizens saying, saying no, we need, we need more, we're already too skinny and we think our expenses need to grow at a higher rate. And that's what this represents.

That looks like a big number, but in terms of the overall impact on the budget, it could be very, very small.

Yes, same, same thing. The scale is small.

Is that—

oh, please.

Well, and I'll— but I'll also say that our Senior Citizen Center is also It's a regional draw. So because it's so successful, because we have so much programming, we get more people that come in. And then we also have internalized the food preparation, and most other senior centers don't do that. Now, that's a higher level of service. Residents get better food, but, you know, there's— There's a cost to that operationally.

It might also be reasonable to assume that over time we will have more seniors.

Got a bunch of baby boomers coming.

Yes, we're all getting up there.

It also might be a factor too of in the '90s we built that building. We've done a pretty good job of maintaining it, but we suspect that that'll be, uh, one of our older buildings that may need some more attention relative to other buildings moving forward.

And I guess that was going to be my question. Is there a sinking fund that we're using for anticipated capital expenses for that? Is that part of it or not? Is that purely operations?

Yes, that 10% is operational.

So no sinking fund?

It's not sinking.

Okay.

So it's not capital replacement for it.

There's just our fund balance, which you've seen us come with some budget amendments, chillers, flooring, et cetera.

Okay, so that's not—

That are using some of that.

And I don't think in our one-time expense we have anything related to the senior center. So no, I mean, this next— the next slide, it'll talk about that. But yeah, there's no—

We have done some significant improvements.

We have.

Last few years.

Any other questions on this slide? So the capital expenditure average annual growth rate, that's really to capture the difference between Those indices relative to operational costs versus capital costs. Typically, your construction cost index is higher. This wouldn't reflect— again, probably from 2019 to 2023-24, there was huge inflationary pressure relative to construction costs within Utah. And so This is more of an average. So if we saw, if there was a substantial inflationary pressure, this, I'd say, hey, that's something you can think about, right? But right now the model is intended to cover at least average inflationary assumptions and see what happens in the model when we again layer all these on top of each other.

And I'm sorry to be that person. You've got about 20 minutes.

Okay.

We'll stop asking questions.

No, no, no, we need to ask questions.

Yes.

And, uh, yeah, due to the complexity of this, again, the idea here is to get feedback and we can iterate on this exercise. You know, this model is supposed to be living. Alrighty, uh, let's, let's talk about some of the, um, new or unfunded one-time expenses and the operational expenses. Here shows you the totals that we're bringing into the model. So dollar-wise, you know, for my budget, these are huge numbers, right? I would love to have this in my bank account before a capital project list. I mean, we see projects in hundreds of millions of dollars, right? So, um, but, but we are including, uh, one-time expenses that the general fund, uh, is, is intended to cover in this model. And notable projects include, uh, park, uh, construction, renovations, the fire station, as Bryn mentioned. There's some other one-time expenses from other departments, public safety, that we're bringing into the analysis. These again in the model are programmed as a singular occurrence. So we're not— we need to try to cover these expenses, but we're also using the— the idea is to potentially use the fund balance to help smooth that out, right? The bigger issue as it relates to property taxes and your revenue generation is ongoing expenses and trying to see what is the new trend relative to cost and do we need to change our revenue projections to, to cover that. But we do have one-time expenses. Here's an illustration of the ongoing expense, and this is cumulative. So what happens with ongoing is once we layer it in the model, it stays in the model, and we inflate that while adding future years' ongoing expense on top of that. So that dollar can increase pretty quickly, which is what you see here. We asked from the departments, tell us everything. You know, this is the outcome of that. We said, what FTEs, new full-time equivalent positions would you need? New operational elements, supplies, anything relative to your budget, infusion of additional operating costs into a budget line item, tell us everything. And so that exercise, we spent several weeks back and forth evaluating that. by 2032, the cumulative impact of those requests, level of service issues, unfunded mandates come to about $6.5 million. So that's on top of, again, inflation to your base expense that we reviewed on that previous slide, those assumptions relative to inflation. We're also adding up to $6 million in 2032, and that will continue to grow. So the same inflationary pressure that is applied to your base is applied to any new expense that we bring into the model. So while, you know, your return on investment is a positive, that compounding effect is very positive, the reverse applies as it relates to expense and inflation. It's compounding and it can hurt over time because that continues to grow. That further stresses that need to Evaluate revenue resources. How do we mitigate inflationary pressure? Because the compounding effect can be very detrimental if left unchecked. We get to a point where entities say we need a 50% tax increase because of all this pressure that we've let fester. Essentially, we haven't looked at it. So we try to avoid that.

Alrighty.

Laura showed a slide like this. We've isolated to just the general fund relative to budgetary figures. This shows less of a decrease on your property tax, right? So, um, going from 11% down to 10%, it shows an increase in reliance on sales tax. So the similar concept here that we're using the growth in a specific revenue line item to support expenditure growth. So we have to watch that. The, the other issue here that I just kind of screamed to me as I looked at these charts Is again proportionality. I do a lot of work in impact fees, cost of service studies, and proportionality is a big component of that. So understanding proportionality in this— these charts is also critical. So here you're reliant on one stream of revenue, or heavily reliant on one stream of revenue, that sales tax bucket. So again, that could cause some concern, especially if that changes over time. We also wanted to highlight the expenditure growth within the general fund from 2019 to 2026, showing your expenses plateauing out here. This to me is, is really focusing on efficiency, but the other metrics that we've talked about that are a little difficult, more difficult for us to quantify, but showing that the city is, is really trying to keep those expenses matched to that revenue stream. And you can see that plateauing effect happening on the expense side.

Thank you.

Depending on your perspective, that's— it can be a positive and negative. As a taxpayer, I'd look at that as positive, right? Our expenses are being controlled. From a level of service perspective, that can be concerning, right? Understanding inflation, what I know, I'm— I consider myself an informed taxpayer. I would look at that and say, well, what's happening to our level of service, right? If expense doesn't grow, Has our level of service been compromised over time, and am I okay with that, right? How do you feel about that? Uh, this is, uh, to bring this home again, what Laura spoke to. It's just a different way to show this, which is your buying power. This shows the percentage of Orem's, uh, your tax rate as a percentage of the total. So adding up every— all the other tax levies, uh, school district, uh, the county, uh, other districts In, uh, 2005, so going back, you know, further in time, you accounted for 17% of the total tax levy, and fast forward to 2025, you're at 9%. So what that suggests is other entities are increasing their tax levy, uh, proportionally speaking, whereas you are not. So your, your buying power is another expression of how your buying power is decreasing relative to the property tax. Now, that's not saying that you're not generating new revenue, right? Your sales tax revenues have grown, other revenues are growing, but it does illustrate what you're relying on. You're keeping this constant or reducing buying power and letting other areas pick up the slack. Alrighty, so here's the scary part. We're going to show what happens when we bring it all together and track the $25 million fund balance over time and see what happens to that. Um, this is no new property tax. Let's keep everything on, you know, all of our new expense, uh, one-time expense, operating expense. No other tools are being used like bonding other than we do have an assumed bond payment relative to the cremation memorial bond payment that's already kind of— we're assuming it is an existing assumption. So we're not adding new bonding resources here. to mitigate any funding shortfalls as it relates to one-time expenses. I won't go into this. This is just reiterating the assumptions that we're pulling into the model relative to the revenues and expenses. I'll provide this slide deck so you can see these. What it's showing is what the 2019 to 2024 actual change in those categories were compared to what we're assuming, so it'll help you see What those assumptions we're making relative to revenue growth. So that question of sales tax, 2019 to 2024, you had almost a 7% growth. We're assuming 3%, but if you isolate just the last 3 years of actual, that's really 0% historic growth. So that, that's what we have to be careful of, is it really depends on the window we're looking at relative to historic trends. Yes.

And without getting off on too much of a tangent, do we have anything to account for that drop in those last 2 years of the plateau?

My thought, I can just make a guess, but you might have been going through a rebound relative to the impacts of COVID to say, okay, people start purchasing more as you've got out of that time. And then once that new norm is established, then you can say, okay, this is where I'm comfortable spending, right? How many times I go out to eat and, yeah, Well, and I'd be curious too.

I don't know if we can comment on this, but vehicle sales, they were highly inflated and are just now starting to be realistic. So how many— so on buying a car?

Yes.

Yeah. So some of those trends and actual cost of a product would influence this. So inflation can benefit you on this side of your revenue stream, right? Because it's a percentage of total expense. When we look at sales tax revenue, 1% of The dollars that go out the door. If I have to spend more on the basket of goods and services that I'm accustomed to buying, municipalities and other taxing entities will get more tax revenue. As that inflation cools down, then that revenue is going to plateau because we're not spending as much on the same basket of services that we buy. So, uh, it can benefit you, but in this case, I would guess it's Those factors are causing a slowdown. Other factors, your economic development. If you've had growth, redevelopment, and then that stops, then you're going to see that plateau as well. We've reached a new norm, essentially. Alrighty, again, a lot of data here. What this is showing is the culmination of those assumptions as it relates to your revenues and expenses. So we've summarized the revenues up top here. This is taking those assumptions and making projections relative to your budget and saying, what do we think revenues will grow to? And then what do we think our expenses will grow to, uh, based on, um, all of those assumptions? Uh, here you can see that the disparity— um, yes, who's that?

This meeting is being recorded.

I don't know, that's—

we've kind of stuck with this.

You're stuck with it.

Oh, okay.

Just hang on. It's going to be smaller, but—

oh, no, no, no, no, no.

That little thing—

I'll show you in the next slide. I'll illustrate.

This was covering some numbers, and so—

Yes.

So, again, what I look for is what's happening in the model and what are the factors leading to that, because there are assumptions in this model, and assumptions by nature are guesses relative to the future. And we can change those assumptions. It just introduces risk into the model. If our assumption is conservative and we're not comfortable with that, we can be aggressive, which increases the risk scale, right? It creates more risk in the model. So, here, Because we've made assumptions relative to revenue, the growth is a lot slower, whereas our expenses, we've included everything and grown those at a— at what we think is a little more maybe realistic or aggressive growth rate to capture changes in expenses. So you can see the deficit just grows over time. We do not have enough buying power or revenue growth to handle That inflationary pressure and unfunded mandates within our pro forma, and that causes this.

So if you can go back to the last one. Also, it's interesting to note, so if we got to that point, you could completely get rid of the city manager, but you'd still be in that deficit.

That's an important note.

On the dollars, we should consider that.

It does highlight, though, you know, that comment does highlight what Laura stressed, which is when you start talking about issues and the magnitude, then you determine, okay, if we go back to our metrics relative to sustainability, efficiency, cost reduction, and revenue generation, there's a lot of service provided here. You know, when you look at the general fund and it becomes very challenging to say, what are we willing to remove from this equation, or what are we willing to control relative to this equation? So it's removal of cost, the control of that cost, and then the revenue generation on top of that. All of that has to be considered when we talk sustainability. But the magnitude is what I focus on, right, is the magnitude of of impact is pretty substantial. Um, and when I compare what you generate from property tax, it becomes even more substantial. We're generating $7 million in property tax revenue relative to a deficit of $25 million by 2030. That's, that's a big nut to crack there. So, um, I'm not saying— essentially what I'm saying is this is a challenging dilemma to be in. And so understanding it is the first step and then determining what do we do about it. This graph highlights 2 things. What I wanted to show was again our fund balance. That blue line is calculated based on those numbers above. We essentially eat up all of our $25 million fund balance, then go negative. We cannot sustain the assumptions that we have programmed into the model. But then I also included the pink line, which is I turned off all of our Uh, one-time expense and, um, new operational needs. So this highlights the inflationary pressure. The pink line is essentially saying if we have slow revenue growth and just the inflationary pressure in our base expense, we still have a problem. So it helps me understand that it's not just level of service issues or, or trying Quest, a Cadillac, when all we can afford is a Ford, right? There's this inflationary pressure that will affect you regardless. And so it's controlling that and balancing that. So that gives you an idea of those 2 scenarios. I wanted to bring home— I've highlighted this throughout the presentation. We focused on— we're talking about revenue generation, this model, what we do with your property tax rate. How do we make assumptions relative relative to sales tax and other revenues. These elements are still very important, but it's— that's a little bit more on your side, right? As legislators, how do we manage our level of service? What are we willing to fund? What are we willing to remove from the equation? Those are definitely hard discussions, but something that happens outside of this model. Um, see, we've got 3 minutes. Uh, let's go to This slide, this was really a comparative slide that showed some comp communities. Sorry, you can't see the ones over there. Logan is the last comp here, so there's nothing over there. This is our '24, '25, and '26 budget showing where Orem stands relative to expenses per capita. And this is purely a total expense divided by the the population. It does not address the level of service issues between communities. So comparative data can be very challenging because every city is different on what is provided within the general fund, how services are funded with other subfunds. But it does give an idea, going back to the total expense growth within the general fund that I showed in the previous slide, that Orem over the last several years is focusing on those other metrics, which is cost containment and efficiency, right? Because our cost per capita here is on the lower end and staying pretty constant, right, relative to our population changes. So that, that's an important consideration as we look at those other metrics within this sustainability model.

Alrighty.

As we talk about what to do next, we look at what levers we can push and pull in the model. We can obviously address assumptions if we want to again change those assumptions. We can do that. We can turn on and off expenses relative to those new or unfunded expenses. Property tax is one of the levers that you can actually specifically manipulate in the form of the truth in taxation process. So you can change that. You can also change Um, the bonding tool that you utilize, so you can use that to help mitigate one-time expenses. The one-time expenses that the general fund is covering is not a huge component of this relative to a bonding perspective, especially relative to your total general fund expenses. Um, and then the other item that you can evaluate, which the city has done over the years, which is strategic revenue evaluation, it's looking at your charge for services, for example, saying, are those where they need to be? Make sure that's maximized. You've addressed impact fees. That's not directly related to general fund, but maximizing those ensures that there's less pressure on the general fund. So that strategic evaluation is very beneficial and should not be overlooked. It's just not a specific lever that we pull in the general fund as it relates to revenue. And then alternative revenues, we've touched, touched upon that with the transportation utility fee. If those come up, They can be utilized again to help alleviate pressure on that property tax. So using those strategically is very beneficial. Ultimately, you know, we need to look at what scenarios you're comfortable with. You know, are we willing to manipulate the property tax? And if so, to what magnitude? And how does that influence this, this model? And then discussing implementation. So again, Mm-hmm. I'm in the envious position of just presenting data. You're in the challenging position of implementation. You're where the rubber hits the road and taking action. But hopefully this gives you an idea of the issue and then what we can do about it. I think that's everything. And I didn't give you a lot of time for questions. So—

Are you looking for an answer from us today, or can we go ponder?

Yeah, yeah, absolutely.

I know, I know you need— time is of the essence, I get that. But I'm not prepared after getting— looking at all that to say let's work that into that because—

We also need the presentation.

Yes, yes. And we'll also provide, um, some additional information relative to the one-time expense and the ongoing expense so you can see exactly what is included in the model. And so it's not just A total number can show details relative to that.

This is very, very interesting. Thank you.

So we'll send out the presentations. Also, you can— you don't have to wait till the next, you know, work session to provide follow-up questions or requests that we could then make back to Fred. We can still— Fred, we can still keep you busy using this model, right? And Could we even potentially have you come back?

Yes, for sure.

What is your expectation on the timeline or hope for a timeline on this?

I mean, once we talk about it and review it, what, what is that point?

I would say let's, uh, let's review what— how Brandon is proposing that we need to do initial implementation of some of these.

Is that the next item?

Which is our next item.

Oh, so you've got some ideas for them?

It's our budget.

It's just—

I mean, again, you notice that Fred had a little bit of— he gave you a very, very 50,000-foot level preview of some of what we might propose in the budget.

Okay.

And again, it's long-term. Ultimately, we deal with the budget on a year-by-year basis. So, I mean, we could receive feedback from you on an ongoing basis with this, but Ideally, we at least get feedback on how we apply some of this information or some of this feedback or advice from LRV for a budget year. We would hope for that over the next month.

Yeah, and I think based on our analysis, what we believe are Objective is, and conclusion relative to that 50,000-foot, is there is a need. And utilizing your property tax and that process of truth in taxation and adjustments of the certified tax rate should be considered, right? If we want to address inflation, recognizing the limitations of your revenue stream, that is where we're seeing a need. Magnitude of that is really right up to you on how aggressive you want to address that. But that would be our conclusion is we're seeing a need to take action.

And Fred, even though Laura needs to go, are you still staying with us here at this meeting in case there's something that— a connection made between Brandon's presentation and what you shared with us, or do you have to—

I have about 30 minutes. That's okay.

All right, thank you. All right, Council, how are we doing? Do we need a 5— like a literal 5-minute break? 3-minute break?

3-minute break.

3-minute break.

Got food, whatever.

I've been depressed.

Why don't we start?

In this meeting?

Yeah, yeah.

We can start.

I'm glad you didn't see my eyes closed. So it's the actual presentation.

Are we still being recorded?

So maybe I'll reach it.

You have until 5.

I hope I only have till like 4:15 or 4:05.

For what?

Because Janica's still got a piece.

Oh, it's gonna be really quick.

Okay, no, we are— we did cut 10 minutes from your time.

We have to have 5 between the 3 of us.

Okay.

So we begin our first meeting among several that we'll be having in relation to our fiscal '26-'27 budget. We first start with our revenue expectations, projections that we're currently employing in our— into our budget. That's usually the place that we start from, and then we try to mirror our expenses with those revenues, obviously, because we try to have a balanced budget. I believe these next few slides, I'm not going to necessarily go over them in depth, but I believe and shared them with each of you in relation to—

Yes.

One of the big things that we are doing this year is separating our public safety from our general fund, and we are creating a— what's called a special revenue fund. And the expectation would be that all revenues that are directly associated with public safety would also follow that, and that we would then go through a process of dedicating Our entire property— currently our entire property tax through that fund as well, so that all property tax dollars are assigned and dedicated to the public— this new Public Safety Special Revenue Fund. That's what these discussions here are talking about as far as creating that special revenue fund, and then We would later come to you during that meeting in May when we would bring you the tentative budget. There would also be a resolution that you would then pass. I would then deliver that resolution to the county, who would go through the process then of changing that property tax name. So it would no longer say City of Orem, it would say City of Orem Public Safety, um, and they would do that magic within their system as far as property tax goes.

Um, just, Mayor and Council, I think I've shared this with most of you, but I still have a couple left that I need to share the details. So thank you for clarifying.

Um, you can see here the implementation timeline that I just mentioned in relation to the tentative budget and that resolution. related to that. And then later on in the, uh, June meeting where we normally adopt the budget, then we would adopt the, um, that property tax change as well as that change in the fund, um, that would now exist. So, and here's a just a general look as to where that Sits in relation to those revenue sources that would be applied directly to that new special revenue fund. I'm giving you an idea of what our '26 adopted budget— those numbers obviously are currently in our general fund, but for comparison's sake, I wanted to make sure that you were aware of what they were within our general fund and what they would look like inside that new special revenue fund. Besides property taxes, we also have fire sources from both Lyndon and Vineyard. We receive ambulance for any ambulance service that we've— those customers who are using ambulance service, and then the various other funding sources that I mentioned that are directly related to the work that they do.

Liquor allotment.

So we have liquor control officers.

Okay.

And they do work, and then we're paid through—

Thank you.

We are UHP.

Yeah.

State DPS.

Yeah.

They, they do an allotment every year based on—

Troopers. Yeah.

Okay.

Um, this is one of the, the important screens that I want to focus on during this meeting.

Sure.

As you see, we talked about and Fred gave an idea of— so first off, I want to make sure everybody understands the disconnection between the rate and the revenue. You'll notice over time the certified tax rate change. There's a column right here. You'll notice all of those changes are negative percentages. You go to the right, as far as revenue goes, those are all positive percentages. So one does not equate to the other in that regard. So if you'll recall in both Laura and Phil, what they were— Fred, what they were talking about, revenue stays the same. We are, we're in essence guaranteed the same amount of revenue each year. What I have then done is said, here's what our fiscal '26 was, and that's actual. And then I said, well, let's just make an assumption here in '27. Let's assume property tax values are stable or maybe even continue to increase a little bit. If they increase a little bit and our revenue stayed the same, or in this case I increased it by a whopping $32,000, Which is a half percent increase. So that's even higher. That would be even a higher revenue number than the year before, which was 0.3% increase. You would produce another negative certified tax rate, meaning it would go down again. We have talked about a property tax increase, and in this model, I've put in just for an example, I've added $450,000. See the difference between the $32,071 and the $482,071 over here on the right? That equates to about a 7% increase, right? We add the— what was already there. So that's a 7% increase by adding that $450,000. And you can see what then that would mean over there on this side. What that would mean to our certified tax rate. To be honest, that's a total guess. All I did is say, yep, if it went up 7% over on the revenue side, I'm going to make an assumption that it— the certified tax rate would go up 7%. That's not going to be true, but I just— for so you can just see, it should cause that certified tax rate to have a positive increase. It may or may not be. 7%, because I have no idea at this point until June 8th what our certified tax rate is and will be. But hopefully this gives you some idea of how those 2 things interplay with each other. And then, as both Laura and Fred mentioned, new tax law would require— if we were to do a property tax increase— requires us to provide a property tax impact statement. If we're going to increase, what would we be spending it on? And then that's what this bottom section down across the bottom is trying to relay. We would then, in that impact statement, we would outline all the things that it requires as far as that goes, and then say, here is what we would be spending those additional tax dollars on.

Okay.

And you can see kind of that breakdown of how those 2 additional officers that we would be adding, how that would play. Now I want to point out, you'll notice that the little asterisks down at the little stars at the bottom on this slide, it does not include that $450,000 because I don't want to make an assumption that that's going to happen. So This slide is just trying to be representative of if that was to happen, what would that kind of look like?

Brandon, would you, would you educate the council on the difference between $6.9 million versus $8.1 million in terms of the property tax total revenue?

Okay, so yeah, so this, so if you may or may not know, our certified tax rate consists of 2 elements, city operations. And our debt, general obligation debt. General obligation debt is always covered 100%. So no matter what it is, I provide that information to the county. The county then sets whatever the rate needs to be to produce that amount of income in order to cover the general obligation debt. They then do another calculation based on all of the assessments that they do in order to produce same property tax amount— well, it's new growth, but for lack of a better— we'll just take new growth out of the picture— but to produce the same amount, what does that new assessed value equate to as far as a certified tax rate? And in most cases, as you can see, that means it's going to go down. So the $6.89 million that I have there is not inclusive of all property tax we receive, but it is that city operational I've excluded the GO bond debt because it's irrelevant, to be honest, to this choice. And, and that's in the case not only the revenue piece, but also on those rates, those certified tax rates. They are only the city operational component.

Brandon, that's also what we would need to share and notice out to the public is the percent increase, just the operational side, not operational and And under even the new legislative law, um, their focus—

just so everybody's aware— their focus is no longer on the rate. Their focus is what dollars are you asking for and what are you going to spend them on. They also understand the rate is really somewhat irrelevant. It will just be what it is. They want you as a body and us as staff to focus on what is it that you have a need for additional property taxes. So that's what this kind of stresses. But before I move on, are there any questions about this new fund and/or property tax element?

Uh, one question. Is this a new fund, a vehicle that is newly available to us, or has it always been available to So special revenue funds are—

we have several already that exist within the city.

Yes.

The difference here is that dedication of the property tax to that specific fund. And so if you dedicate it to that specific fund, obviously we have to account for it as such. And so in order to account for it, it has to have its own fund so that it's transparent and readily visible that those— all of those dollars are being spent on what you said you were dedicating those dollars Bren, isn't dedicating property tax and/or a public safety dedicated fund, isn't that relatively recent state legislation over the last handful of years, or am I— Yeah, that part, the dedication of the property tax, I don't know that part as far as when that went into effect.

Cities I know of that have done it have been within the past couple of years.

But so it— at least in implementation, uh, cities have only been doing it within the last few years. But Jenica, I'll have Jenica do some research on when this became a possibility.

Just to give you a brief— hopefully a brief timeline idea, there's 2 timelines, one with a property tax increase and one without. We'll just— no property tax increase. One slide. Meet on May 12th, pass a tentative budget. Meet on June 9th, pass an adopted budget. So we do all the proper noticing that we're required to do. I give some presentations. You have— in between those 2 dates, when I give you that tentative budget, you have the opportunity to ask questions, review whatever, make whatever changes you want to see in it, and we would then come forth with those changes in that June 9th meeting, and you would pass and adopt that budget at that time. Relatively straightforward. You want to do a property tax increase, however, under the new guidelines, that May 12th meeting would have various conditions related to it, have to Notice on the agenda for that meeting has to be a separate agenda item. I have to indicate that there's a property tax increase included in the tentative budget. I have to also state that there is an impact statement in that budget document as well, and then that's in the agenda. And then I actually, when we're at the meeting, I actually have to say that again.

And yeah.

Out loud.

Out loud. And so So then everybody's then put on notice that, hey, our budget includes a property— a potential proposed property tax increase. We then would go to June 9th, and in that June 9th meeting, assuming we want to continue with that proposed property tax increase, then same thing. I have to include those same things on the agenda. We also have to produce that impact statement, which has to stay there. And then we have to, in that meeting, have to indicate those 4 bullet point items that are there, that we are intending to exceed the certified tax rate as given to us by the county. We intend to— those approximations of what the impact of that will be and when we would be holding the public hearing in relation to that property tax increase, which would be sometime in August as determined between us, negotiated if you will, between us and the county.

How does that work if your budget is— when do we pass the budget, June 9th?

So if we were going to do a property tax increase, what you would actually then be— um, what you would actually be passing is what they then call an interim budget. And in that interim budget, it would exclude— you would pass everything, potentially pass everything else Except for— Except for the property tax component, which has to be separated.

So Laura was talking about—

So everything else, and you then have to obviously not spend any of those dollars that that increase is linked to.

So basically public safety would just be on hold in those—

Those 2 officers.

Those 2 officers or whatever.

Okay, correct.

Thank you.

And so then you identify that. Then when you go to the property tax increase, all you're then really— if you were to pass, go ahead and pass everything else, then all you're doing at that is passing it, saying this is what we want to do going forward. And then once it's passed, it's then included within our adopted budget.

If it doesn't pass, you have to amend your budget?

If you don't pass it, then the interim budget in that meeting would then have an ordinance that would say the interim budget that we passed back in June is now our final budget. So I thought to touch it.

These are genuinely— these are good questions, and these really are part, uh, essentially not only truth in taxation historically, but the additional constraints added in this last legislative session in action.

I want to share from my experience being on the council when we did do We had a Truth in Taxation. We, we didn't have this where it gets pulled out. We had to approve a tentative budget, and the tentative budget that we had included the tax increase.

Oh, yes.

And so even though we— and then we proceeded as though the tax increase were in the budget. And then at the— in August, when we had our Truth in Taxation hearing, we— the council voted to change the percent There was a property tax increase, but it wasn't as much as what was in the budget. And so you had to go back and fix that.

Correct.

You would just change that in your adoption.

Reflect that rather than say pull that out. So just, it's, yeah, that was just our experience from before.

One other fun little item is this special note down at the bottom in the state legislature. They also now would require us in that August public hearing to be able to allow people to participate in that meeting while not being here. So they have to have either audio, video, or both capabilities to participate in the meeting, as well as be able to write written commentary through whatever means we can provide before the meeting and during the meeting. So that's a Pete has assured me that he can make it happen, but it might be a little bit tough on certain elements of it. But if that— we were going to go that route, we would certainly get on the horse to make sure that that was going to be meeting that requirement.

Okay.

Okay, moving on. That then leaves our— the remainder of our major general fund revenues, which, to be honest, at this point Once you pull out all of that other stuff, basically it's sales and franchise taxes in the general fund. Those are the 2 biggest elements in there. You saw in Fred's discussion, he, he used 3%. I'll be honest, we did not correlate that. I just put 3% in because I went down to our conference and the state economist said that what the state is using is 4.1% for the current year and 3. 3.5% for fiscal '27. And I said, well, we're not quite usually around what the state gets because they're much more diversified, obviously. So I'm using 3.5% for the current year, for '26, within a 3% increase for '27. I will say, I— it's probably slightly more on the aggressive side than I might normally have But as I said, it is where it is.

But there's nothing that mandates what number you use. We can use whatever number we want, essentially.

We can.

Whatever we want.

More aggressive than— more conservative to match the last couple of years.

Yes. You know, he mentioned the last 3 years were a 1% growth, a negative 1% growth, and last year was a 3% growth. So take your pick. Which year is this going to be? Say what?

3% would be on the aggressive side in your mind?

It would be, yes.

And what do you think a more middle-of-the-road number would be?

2%.

Thank you.

And as you can see, most of the other revenues are pretty— and Fred even pointed out there's not a lot of growth in those. They're not very big dollars, even the ones that do have high percentages. So those kind of things are— and you might notice interest earnings are going down. We spent a lot of money on a particular building.

I won't know which—

we won't say which one, but that really reduces the amount of interest earnings that the general fund receives. So any questions before I move on? All right. Talked about utopia. Here's just a slide to give you an idea of what the last 5 years have been and what way maybe we are expecting for fiscal '27. Fiscal '23 was really the year where they really started to bump things up and start producing really a bigger— not just matching that 2% that Fred mentioned, the 2% growth in our payment. That was the year they really bumped it well beyond that, that just covering that 2%. Cemetery fees are also general fund related, and so— and people have a general interest in cemetery fees, so this gives you an idea of what we're looking for in relation to an increase in those fees.

And did we look at those last couple years?

We look at— yeah, we adjust them every year. And so now I'm going to talk about all of the other funds, not all of them, but all of the other major funds. And before we get there, I wanted to— before we start talking about rates and different things in relation to those funds, I just want to kind of get— and I realize, okay, that's pretty tall.

It's much smaller on here.

I'm good.

So I wanted to give you an idea of what is being included in these rates that you're going to see for each fund and what they look like In total. You'll see that all of our rates, which we didn't— I didn't put it on there, but those are all the fiscal '27 proposed rates, what that would mean comparatively to all the other cities' current rates for fiscal '26. And then out here on this far right side We make an estimate based on some historical past, what those rates that they might— ours, you'll notice, is the same, $140 either way, because those are our fiscal '27 proposed rates. But what would those other cities' rates look like if they do that normal historical average kind of increase to their rates? So that we're, in essence, kind of comparing apples to apples as best we can. That's just related to utilities. Um, then I just wanted— this includes the property tax, and this number right here does include a property tax increase. It would be about $1.25, $1.30 less if you were to not do a property tax increase.

Still just above Springville.

Correct.

So you would be just right around where they're at. Yeah, just barely above them.

The proposed number is where it's compared against their existing number.

Okay.

So that's proposed.

Yeah, these numbers are all where they currently exist. There is no estimation included here if they were to do any kind of property tax increase. That one we definitely don't know at this point which one of those are doing any But, Brandon, I'd like to highlight something you said.

Uh, the proposed— if we were to do what you're proposing, so a $450,000 a year increase in total property tax revenue, the average impact for sort of an average home, we guesstimate about $1.25 per month.

That's really close to what we experienced back— what was it, 2012? The $3 million?

Yeah, it was 2012. It was about— I remember people saying it was like getting a hamburger, a combo meal.

Yeah, a Happy Meal. So it was like $5 for $3 million. So $1 is going to be around $600,000 or so, $500,000. So it's very similar to what we experienced back then.

So about $15 a year.

Yeah, we have to see that's— So, but what average—

so yeah, what average house prices are they using? Yeah, what, what's the house average?

$513,000.

That has been there for years, right?

We actually— well, we increased that based on what the county tells us the average rate is. So the county tells us what our average is.

$700,000 to $800,000, we're going to be paying more than a half That, yeah. Just full disclosure, I just don't want to tell—

Per year.

Per year.

Not that it's going to be bad, it's probably going to be a super-sized tapping.

Super-sized.

I just get stuck on that one, right? And that's interesting to know that it came from the county. It's never been changed.

Yeah, it was not.

Do you remember?

Yeah, so I get those updated values from them every year. So that's from June 2020.

So we would have a different countywide average.

This is for Orem. That's the average Orem home value.

Tax at the 15%.

Their home value. So you should keep that in mind. As we all know, the county value is significantly lower than what your probably real value is, right?

County assessed value.

So with that setting in mind, as far as the rates go, so here's a breakdown just of revenue comparative for each of our major other funds that we have, um, for both what we put for our '26 budget as compared to what our proposed '27 budget looks like currently. These are subject to change, I will tell you that. but this is where they're at currently. Um, we, as you saw with, uh, various CARE tax, I'm slightly being even slightly more aggressive, um, in relation to how much, uh, we get. And I should say that 4.8, that's a little misleading because the 3.2 is going to be low. So same concept, I'm taking that 3.2 and I'm saying, well, it's really not going to end up at 3.2, it's going to be 3.3. Or 3.25. So the 4.8 is slightly misleading in that regard because we're comparing budget to budget and not what my estimated actual is going to be. Um, so you can see most of those have relatively healthy increases, and then we'll touch on each one of these as we go over here. Well, water Where we have a proposed— you can see the tier rates and the associated percentages related to each of those tiers and the increases. The bigger, bigger change is down in the bottom section under the proposed base rate changes, as those are proposed to be 5.5%. Um, you can— if you touch back there, you can see it total revenue-wise has about a 5.8% total increase. when compared to the prior year budget. Also within that water fund, we have— last year we had a new water source fee related to Jordan Hill and Deer Creek, and that fee would then be also raised from $377,000 to $406,000. And this year we have a new regulatory fee that we're, that we're being required to, and we are recovering And that's at $0.02 per 1,000 gallons. And you can see the proposed revenue that would be associated with that regulatory fee. For sewer, the Water Reclamation Fund, the current proposal for the base rate, see, while still— while a healthy increase, certainly not to the same level as the prior 2 years, trying to again follow along with our Current master plan, and then a volume charge change also, I believe, associated with that master plan.

The master plan includes phases of debt to then do the projects associated with the master plan. So it helps us qualify for the debt needed to make the improvements. Primarily at our wastewater treatment plant.

That was $260 million that was adopted by the council a couple of years ago in 2023. So everything's going to increase, as you all know. So we are just going to be anticipating those increases, but we're funding it right now. We've coordinated with Lewis Roberts and Birmingham, Fred Philpott directly, to incorporate the debt portion of that payment for that. That's why these increases are in place.

to pay for the debt.

We anticipate bonding probably the end of this year for about $65 million for the water reclamation facility.

Stormwater, you can see the proposed increase there. You can see that change is pretty big. But you'll recall, hopefully you'll recall, we are in the midst of trying to deal with abandonment of the existing canals. I'm trying to get this fund to a point where we can deal with those conditions as well. Solid waste, we are basically— went through a lot of negotiations with Waste Management, and the increase here is basically in response to what we've been able to negotiate with Waste Management in recovering those additional costs that we worked out with them. Street lighting fund, again, another increase in relation to the street lighting system and the maintenance thereof. On the recreation side, you'll notice there were, over the last 3 fiscal years, there were zero changes to any of the funds shown here. And to be honest, it's just has come time to be able to start increasing those fees. As necessary, you'll notice we still didn't increase the general annual admission. So kind of potentially trying to get those— get people, hey, buy those passes, better deal for you. And finally, in our budget, and as soon as we're set, we will be delivering to you the remaining fees and charges schedule. Which is one of the exhibits within our tentative budget, but we will hopefully be getting that to you prior to that date. I think we're— so we'll work on trying to be able to get that to you as soon as possible. That has a listing of the 20 pages of fees and charges that we have within our budget. So, are there any questions? I know we kind of rushed, kind of pushed through, but that's to give you just kind of a heads up as to what, you know, where we're headed and what you're— we're intending to kind of show you, uh, come the tentative budget.

Will we get these slides also?

Yes, and I—

Theresa has this presentation.

Thanks for the detail you provided. Appreciate that. Given that you presented right after federal And Phil showed us some scary charts.

He did.

To what extent does this proposal help put us on a more sustainable fiscal pathway? I can't quite tell from the numbers you presented how much of Phil's concerns this resolves and how much of it remains unresolved.

It really probably does not resolve very many, if any, Ongoing issues. It is our best attempt, and to be honest, as I mentioned with sales taxes, being significantly more aggressive with various elements, particularly within that general fund elements, to try to make that come as balanced of a budget as we possibly can. You'll recall that pink line that he had. It would be potentially extending that pink line further out than he showed it. So that would be what the— this budget would in reality end up doing.

It doesn't solve anything, it just buffers a little bit.

Correct.

Can I say more specifically for the general fund?

Yeah, that's—

Enterprise funds, we are progressively moving forward.

Yes.

And I just want to clarify, our budget It has to be balanced every year, which is why we're talking about potentially modifying the property taxes for this year.

But you're saying that whatever we modify this year according to your proposal won't necessarily solve our long-term issues, correct?

Okay, okay.

And Jenica's up next.

Other questions?

Chris or Jenica?

Go away. Might as well.

Um, well, Chris is getting up there. I also just want to say I really appreciate, uh, the Young Council's willingness and encouragement to engage in that long-term general fund sustainment that you see here Shows that you do care about, um, state of the city's finances, not just in the short term but over the long term. Um, like I said, with everything, I think it's another tool we have to use to make sure that we're still leading with being efficient and effective, um, and, and also Going after all different kinds of revenues. So we'll, we'll still do the same things that we've done in the past too, to, to cover the gap in terms of going after grants and making sure that we're, uh, provide services to our neighboring cities that our residents are subsidizing that service delivery. Um, so anyway, just I just want to make— want to make sure that, uh, know that we as staff appreciate your willingness to, to look at difficult things, and, and, uh, I appreciate the encouragement to do that.

Thank you.

Want to talk about getting some tough—

toughness? There's—

there were concerns when this— when the— when Provo City adopted the TUF fee, uh, back in 2013, and they, they thought about changing it to UTF. That'd be Utility Transportation Fee, because they thought TUF sounded maybe aggressive or something. In any case, so it is what it is. So the Transportation Utility Fee, um, I'm going to give you some historical background a little bit. How much time do I have? Isn't it about 10 minutes, you think?

We got a half hour.

You do?

Do I?

It's like 10 minutes, you said, right, Carrie?

Well, y'all's got to be done at 5.

What do you want, Carrie?

We, we only need a few minutes, but we still have the CARE tax to talk about.

Yeah, from 5 to 5:30.

I think you have to turn it off at 5.

5 to 10 minutes.

I did, but I got it fixed. Or changed.

So, hard stop at 5:30.

5:30. Yeah. So, this, this item, agenda item has till 5.

Okay.

Well, I'm excited to present to you on the TUF. So, Transportation Utility Fee. Basically, this is a funding mechanism that creates long-term sustainability. We're talking a lot about sustainability for general fund. Historically, the streets have been maintained through excise tax revenues and sales tax revenues most recently. Utah, Utah County sales tax transportation portion of that. So it's, it's creating another lever to pull if need be, and we feel like we do have a need. We have a gap, funding gap to provide quality roads and surfaces for drivers in— The revenue is generated proportionally amongst all users of the road. That was one of the concerns that was expressed. years ago when Libertas objected to Pleasant Grove's utility fee. So some history here, probably implemented the first TUF in 2013 in the state of Utah. Other cities followed, a few followed over time, including Highland and others I'll show you on here. Highland, now Vineyard most recently, we're following it now this year. Pleasant Grove, American Fork's considering it this year, and so forth. In 2020, there was an objection to Pleasant Grove's tough analysis and fee that was implemented, and that was objected by Libertas. They suspended their applying their fees in 2020. It went to the Utah Supreme Court, and then Utah Supreme Court ruled in favor of Pleasant Grove in 2023 and deemed that This is a legal fee to charge. Libertas' perspective was that this is an unfounded tax of sorts. So indeed, they determined that there was a nexus between the fee and the services provided. And so that's since been covered by the Utah Supreme Court. Since then, the Utah legislature has sought to formalize an acceptable plan for transportation utility fee guidelines. In 2024, '25, and '26, they went before the legislature. '24 and '25, House Bill 367, and then in '25, Senate Bill 310. They all got tabled and they didn't get accepted, in large part because of some opposition by the LDS Church to Opposed that because primarily for BYU impacts and so forth, the impact to them was going to be a very large impact. Well, like, this was a tax on them. However, it didn't need to be a fee. In 2026, the legislation went through and it was very successful. And this gives you kind of an update of what that is. So House Bill 425, the TUF authorization, authorized municipality or county to impose a transportation utility fee. Similar framework to 2024 and 2025, and some of those concerns back then that I shared with you were regarding taxing—not taxing—but applying a fee on ecclesia or church properties. The bill defines a TUF as a fee imposed to generate revenue to pay for costs associated with developing, constructing, maintaining, operating, repairing, upgrading, or replacing a transportation facility. It's extremely broad. What, what Provo adopted in 2013 was just to address the needs to maintain what is existing, not to actually build something new. And so this is a broadening of what we're expecting it to be. There's no language explicitly related to exemption of religious or tax-exempt facilities. However, how they got around that, that they said that you would exclude the least busy transportation day of the week, not for a facility, but citywide. So citywide, what would you say is the least amount of traffic that you would experience?

Sunday.

On a Sunday. Therefore, any data collected regarding a Sunday Is eliminated from the study. Church liked that. So that's how it went forth.

So, Chris, if you could just go back real quick. Sure. In this— in my State of the City address, you heard me talk about wrestling and wrestling even friends and neighbors. I may or may not have had to wrestle with Senator Brady Brammer over transportation utility fee.

I'm sure you've—

Rib, that's what I like. Ribs broken.

No ribs were broken, but some of us were humbled.

Some of us.

One of them at least. The key highlights from this bill, I'm going to go ahead and read these through. It requires a reasonable relationship or a nexus between the fee and the service being provided. So the benefits are created by those who pay the fee. It requires a study to show that there is a maintenance need and a funding gap currently. In developing the fee, it needs to use methodologies based on trip generations, vehicle types, traffic counts, and it could exclude the day of the week which has the lowest traffic. What I just mentioned, it also imposes different TUF rates, shall impose different TUF rates for different classifications of users, including commercial and residential. Right. It requires a public hearing before imposing the TUF. City shall establish a transportation fund for all TUF revenue. TUF may be imposed only by ordinance, and it must have an appeals process. So, the city shall conduct an annual review, and then TUFs expire automatically after 10 years. They could be updated every year if you choose to. It's just, you have to spend some extra money to do something like that.

Okay.

So you might ask, well, where are we in this process? Everything in yellow shows what we've done to date. Everything in green is showing things that are coming forward, coming soon, based on your input and feedback. So there's an industry standard for trip generation rates that are applied to, to all of the trips that are generated throughout the city. That's using what's a document that's called the ITE Trip Generation Manual, Institute of Transportation Engineering. has developed a trip generation manual, nationwide product that's out there that helps us as communities, as traffic engineers, as civil engineers, and so forth in determining how much traffic is actually being generated typically on average over the course of a day. And then you can apply that throughout the course of the year. We needed to also perform a study and show that there's a maintenance need and a funding gap. We have, and I'll get into details on this in just a moment, but we have a funding gap we feel as about $4 million for our streets. We have the excise tax funds that are coming in through gas tax, gas sales, and then we also have a sales tax for Utah County. Those both generate around $4 million each. And so we feel like we need to be putting or investing about $12 million in today to be able to maintain our roads in an acceptable surface manner. So again, I'll get into the details on that. You'll see all the questions on that.

Is this just for local roads, not UDOT-owned roads? We're not talking like State Street, right?

Oh no, not state, just warm city roads. So Geneva Road, State Street, University Parkway, and 8th North, and west of State Street on 16th North are all All owned, operated, maintained, repaired, replaced by UDOT.

Thank you.

In developing the methodologies, we already commented on that. So we use weekday ITE trip generation rates, and we hired a firm, Metrix. They were the first firm to perform a transportation utility fee study back in 2013, and so What they've adopted in Provo City has been kind of the model, I'd say, for the entire state. And the legislators that were involved in creating this legislation specifically have referred to that reference set because they feel it is very solid. So imposing tough rates, we have 2 residential rates that we'll be imposing. That's what we're suggesting now, and 4 non-residential rates. That's what Parametric has recommended. And then it says to require a public hearing. That would be coming soon. I need your approval and recommendation to move forward with this. We need to create a transportation fund. We haven't created that yet. That'll come soon. Then we need to bring forward an ordinance that will adopt this. That's coming soon. If you choose to move forward, and then conducting an annual review. So at the end of each year, we need to look at what we were able to do. We have to look back a year in review. And see, we're able to have enough money to meet the needs of the study that we've performed. And that shows them, identified the funding gaps. We have a document called the State of the Streets document. It's prepared and modified and updated by our Streets Division, in part in conjunction with the Engineering Division. The last time we've updated this was 2021, and we do this about every 5 years. So we're We're due for another one right now. This street is an ideal-looking street. It looks pretty brand new. It's black. It doesn't have any cracking and so forth. It has vibrant disparity color for the lines and so forth. It looks really good. We want to try to maintain our streets to that level as best as we can. What this graphic shows is if we don't perform any maintenance on our streets, how a local street will decline. So what you see in red is a local street. Isn't green as a collector street? Purple here is an arterial street. You might ask, well, why would a local street last longer? Well, you don't have, you know, WB 63 trucks going down that street with heavy loads, whereas you have a lot of freight and other goods and products that are being transported on arterials. So, the actual amount of damage that'll occur over Let's see, it's accelerated about 6 or 7 years here from the local to the arterial. So they get damaged a lot more frequently. They require more repair and replacement and attention over time. So this is what it looks like. Critical Zone 1, we have what's called a pavement condition index on the left. It goes from 0 to 100. 100 means it's brand new, it's freshly laid. And then you come out over here on this line for a critical right here in Critical Zone 1. You get to fair, poor, and then failing. In this zone right here, we're looking at perhaps having to do an overlay. And then down here, you've lost your road altogether, and you have to do a reconstruct of that road. So you've probably seen a road that looks like it's been cracked severely, that— and you have— you can almost pick a piece of asphalt off the road. That's called alligator. And it's to that status. So right now, Lyndon City is working on a road, uh, our 2000 North that we have a shared agreement on, west of State to 1000 West. We're in the travel lane. You can go out there and you can physically pick out chunks of asphalt. The road has failed. Can't overlay it. You can't put any more lipstick on that. It's not going to make it look nice. Might make it look a little nice, but not very good. It's not going to last. So what we need to do is we need to aggressively look at having a pavement lifecycle maintenance plan. And so what we do is we do crack sealing, we do slurry seals, overlays, and so forth over an extended period of time. Every about 7 years or so when we do that, it rebounds a little bit. We might do some surface treatment on it so we can extend the life out farther. This is all referencing a local street. This is failure if you don't do, do any of that, but purple represents consistent For consistent, regular lifecycle maintenance. And in green, it represents something maybe less consistent, maybe a little more periodic. So our local streets, what we've determined are that most of our local streets are probably 25 to 30 years old right now. We have tried to do what you show in purple, but some of the roads are in green. So 25 years, you're starting to approach this area right here. We want to keep it up in this zone and prevent it from coming down here because the cost to repair or to replace a road and reconstruct it is 5 to 6, 7, 8 times as much as it would be to do your preventative maintenance over that same period of time. So like with most things, you have to spend money perhaps or to make money, or you have to spend money to delay the cost into the future as well. And that's what we're proposing.

Thank you.

In our analysis, we're looking at about a $4 million gap. Our roads right now are at about age 25 to 30, in that range. Once you get out from 25 to 30, we're looking at potentially falling below that line. We don't want to do that.

Chris, yeah, would you argue that another consideration might be that road being out of commission that falls here? Significantly longer, significantly longer than just having to do that, those maintenance elements to it. So that inconvenience to the—

Sure, absolutely. Reconstructing, you're going to take, you're going to take the road down for an ext— more of an extended period of time, whereas regular maintenance that occurs periodically, your road's not going to be down. Sure, there's a convenience factor in there as well.

There's a social cost or a soft cost, a quality of life cost.

Quality of life cost.

So for Um, so we were asked by this legislation to look at different land use classifications. Well, you can just break it out into 2 right away. You can say residential, you got your non-residential. And we've done an analysis in our city. Um, all of our parcels generate over 1 million trips a day. 35% of those trips are associated with residential, and 65% are associated with non-residential. If you carve that out a little bit more for residential, of the residential, 70% is single-family, 30% is multi-family. And as you carve out the non-residential by ADT, that means annual daily trips— average daily trips, I should say, not annual— average daily trips, you're looking at 660,000 total, but 74% of those are produced by those businesses and so forth that have over 600 trips a day. And then a much smaller percentage by those that maybe have 100 ADT or 200 ADT or 300 or 400 ADT. You might ask, well, what are those facilities? What do they look like? Those that are under 180 are small office, maybe an insurance agency, dental office, small retail, hair salon, and so forth. And then they gradually escalate based on this criteria here for trips generated. So churches might have something around 100 to 200, a tire store, a self-serve car wash. And 200 to 600, you're looking at a small restaurant, maybe assisted living, a drive-through car wash. And then over 600, you're looking at hospitals, schools, big box retail, grocery stores, gas stations, convenience stores. Large restaurants and so forth. Again, looking back on this, 74% falls into this category right here. That's where the majority of our damage on our streets is coming from, from that right there. The axle loads are— they escalate. As Heather knows, we've done this recently. When you have a semi, it's one vehicle. But it might have the same impact as maybe 500 cars would. So it's an equivalent load of about 500 cars traveling over that same, same stretch. So what is fair? What's the right thing to do? And we break these out. This is a total summary of everything altogether for residential, nonresidential trips generated. They add up to just over 1 million. What we're proposing or suggesting is This graphic right here is for $1 million of revenue. The impact for a resident would be about 90 cents a month, 31 cents on average for non-residential. As you break those down out further, look at a single-family versus multifamily, you're looking at $1.08 to 68 cents for a multifamily unit. And then those down here for non-residential. They would range anywhere from $2 to $142 a month. Again, the $142 a month would be for a Walmart or a Costco or, uh, Maverick— large facilities that have a lot of traffic generated and just the most negative impact and impair our roads more dramatically than residentials. So this is, this is a good reference for us to consider moving forward, we're not entirely dialed in on our recommendation yet. We are in the process of evaluating Utah Valley University in great detail. We're spending some resources there and spending a lot of time and money on dialing in what is going on at UVU more dramatically, more specifically, I should say. We've hired a firm, I think it's Forox, that is doing that study right now. They're looking at every single exit, entrance, coming in and out of campus, and they're going to be collecting data. So it's an extensive data collection effort that's going to take place there to more specifically identify what is their impact on the city as well. We knew that that was going to be, uh, challenging of sorts because BYU campus was also very challenging for Provo. We're sensitive to that. We're taking some extra time and energy and resources to do that. So in a nutshell, $1 million of revenue, On average for residential property is about $0.90 a month. For non-residential is around $0.31. You might ask, then I'm going to conclude with the next slide. What are other cities doing? What have they done? Orange proposing, if we were to do $4 million, for example, that's just something I'm going to throw it out there. The $4 million would be $4.32 a month for a single-family dwelling. In Provo, they're going to go from $4.20 to $4.79. Highlands at $18.50 and has been for years. And it's independent. In fact, their study— well, they didn't do a study. What they did is they applied, uh, the number of parcels that they had in their city and they bonded. So they divided that bond amount of X million dollars divided by the number of parcels and came up with $1,850. That is totally unacceptable in terms of how this legislation was adopted. So they're going to have to kick that away and then start over with a new official study that really looks at More of the science of the trips that are being generated to make it more equitable and fair for everybody in that community. Pleasant Grove is at $676,000 right now. They're going to go to $1,386,000. That's what they're proposing tonight in their council meeting. Mapleton, $875,000, and so forth down. Ours is the 2nd lowest on this compared to Farmington, which may be going up. We don't know. And that's if we were to propose a $4 million increase to our revenues. If we do $2 million, then it's going to be half that, it would be $216,000. $3 million is going to be 25% of that, so forth. Do you have any, any questions, comments, thoughts?

I have a question. So we don't currently have any road bonds, right? Those are—

No.

So is this in— is this something that we, that we would do instead of road bonding, or Generate revenue. I know in the past when we've had road bonds, we generate revenue to do some of these same things.

Contemplated road bonding.

But no, what I'm saying is, is this something that's done instead of bonding?

Right, right. Instead.

And it's just an ongoing— do we just approve it once? When do you—

when you want to increase it, you can, you can, you can, you can approve it for 1 year, you can approve it for up to 10. The study is good for up to 10 years, and you can change it, modify it anytime in between. And after 10 years, you could say we're not doing it anymore. After 4 years, you could say that, or whatever you wanted to do. It's very flexible.

To go back to something that Chris said early on, you have to spend money to save money. Or in other words, in order to keep up with preventative maintenance and extending the life of the road, And prevent 5 to 6 times more cost in complete reconstruction. Our, our, I guess, personal opinion that we're trying to share with you based off of this study with Parametrics is that it's good to take a long-term approach and spend, you know, a little bit each year and Our, our thought would be to treat this like we do other revenue sources and other master plans and studies and update it regularly and bring it back to you and essentially return and report not only on the revenue side, but on the expense side and show you and the public that we're doing what we've promised, said we're going to do.

And annually, we do have to review that and ensure that we are We are spending the money for those things that are— it's been designated to spend it on, and our focus will be local streets.

John, the Provo example of a 14% every 3 years, you want to talk about that?

Sure.

Me or you?

No, you, you talked to Vern. He told you exactly.

Provo just recently had council approve a 14% increase every year for 3 years. So your question about is it annually, is it— yeah, you can write in how you want it right now. Say we're going to do this for 5 years or 3 years and have a set rate increase with an annual review.

Yeah, so in August they're gonna, they're gonna jump to $4.79 and then another 14% next August, and then the next one is the plan as well. So they'll probably be around $5.50 in 3 years.

So was the 3-year based on Their financials.

So is this going to be part of the budget like any of the other fee schedules? I mean, maybe not this initially, it has to be adopted by ordinance it sounds like, but going forward, is it just— is it part of the fee schedules of budgets?

It would be, and it would end up being.

Whether or not we can get it in before July 1st, uh, to meet That— okay, it's questionable, but we may be able to.

Yeah, so if we're not able to put it in the fiscal '27 budget as part of the actual budget, we would just come forth with a budget amendment with an ordinance and add it at whatever time was felt that it was ready. And then in the following, depending on the timing, then it would be included As part of the fiscal '28.

But the process for this is different than the Truth in Taxation that we're talking about.

That's right. It's entirely different.

Yes.

Really?

It says that we need to have a public hearing. Yeah, so with, for example, impact fees, you need to have a 90-day period. This doesn't say that you have to have a 90-day period, but you do have a public hearing and adoption. And we will do some positive outreach to the community and, and making them aware and involved in our policies throughout. In Fred's presentation, he suggested that there was going to be a tough revenue source. Well, I think generally it's around— let's say it's 10% of this would go to the general fund. So if it were a $4 million That would be carved away and put into the general fund. Well, be used for general fund purposes potentially. And that could do some offsetting of your adjustments on a time.

Maybe just An additional highlight here with, with this comparison, right? It's obviously never fun to propose new fees or increasing fees. That being said, you know, it's not like we have doctored these numbers. This, this really is— has turned out to be, you know, an interesting comparison that the city really has done a really good job of you know, upkeeping and doing as much upkeep, as much maintenance, much preventative maintenance efforts on our roads as possible. And, and, you know, in order to keep that up, we've got to charge something, but we're still doing better than pretty much everyone else, especially compared to the total volume of local streets that we have within the city.

Please. Yes, uh, is it a fair assumption to say that non-residential rates, uh, are similar ratios there with other cities? Have you looked into that?

So we have looked into this. Not everyone has adopted the same, uh, schedule, you could say. In fact, we were having a discussion regarding this earlier. It seems too finite. It seems too We felt like maybe, maybe those could be, you know, farther apart. Other communities, they don't. Some of them don't do this at all. They have a range and an application based on, for example, in Vineyard, they have a cost per square foot. And as we looked at our cost comparisons to theirs, something that might cost us or a property owner about $500 for a $4 million note, theirs would be like $7,800 a month. Something like that. So they've been in the newspaper most recently regarding how they did theirs or an approach theirs. Some, some have done it more finite like this with ADTs, but I'd say there's a good portion that have not done that, and they're going to be required to create that nexus for ADTs and what the service is that's being offered. Not everyone does it like this. This is just Provo, actually, which is a tried and true I would say methodology that the state legislators have looked at specifically in creating this legislation. So we kind of modeled ours and hired that same team that did theirs back 13 years ago. They're similar, but they're not exactly the same.

What I think I'm hearing is that some other municipalities don't do this at all. Some of them use a very different methodology and have wildly diverse numbers compared to what you've presented.

Correct.

So if I could, I'll just mention Highland. They have no— they have disregarded the amount of trips that are going to be generated by the individual properties altogether. They took a number, divided it by the number of parcels, and said everyone's applying for the same thing regardless. That's not going to pass the muster with the state legislature. We'll have to redo that. I think American Fork's doing it. Pleasant Grove is going to redo theirs. There are several that are out there that have something in place that doesn't follow the requirements of this bill.

It sounds like the methodology used here was to most closely reflect what the legislators and what the legislature was intending.

100%.

It's true.

This is not related to your purpose today, but at some point in the future, I would love to see the age of all of our roads. Yeah, because what I inferred from your previous comment is that we have a lot of roads that are pretty old and pretty old at the same age, uh, and we want to try to avoid mass failures, right? Right.

I mean, I think the mayor asked if we considered bonding. If you had— if 80— if 70% of our street surfaces were failing all at once, we'd have to really seriously look at doing a bond. And then probably multiple bonds.

But that's where— Replace bonds. That was my question, was replace bonding.

This may help us avoid that situation.

Yes, I would say this would hopefully prevent the need for a bond.

That's— yeah, yes, that's probably— that's a better— that's better describes what I mean.

Well, we're kind of at a point right now, a tipping point I would say, because most of our locals are over 25 years old. That's 75% of our asphalt surface in the city. And the life— there's only a finite life on a road surface. We can extend it as long as we can with, with some tack oil and some surface treatments and a slurry seal and so forth, but eventually we're going to spend more money to do an overlay or eventually a reconstruct. Hope to prevent it from getting to that point, but it is the nature of degrading infrastructure.

Chris, also in terms of Councilmember Member Meekums' request. I think we, I think we can readily provide the grades that we, we, we go through quite regularly and grade all of our streets throughout the city, right? So, and based off of that, we can estimate what its life is.

Yes.

Or when it'll need to be, or the next, uh, level of maintenance.

We're updating our State of the Streets document right now, and then that'll have the most current information in there that I can share that with you.

It's available.

The 2021 is online right now too. If you go to orem.gov, go to Public Works, State of the Streets, it's out there as well. I'll share that link with you.

Thank you, Chris.

Anything else?

Okay, thank you.

Thanks, Chris. I'm just going to— So while Jenica is setting up, we're going to talk about employee compensation. And as you heard from Fred's presentation, about 65 to 75% of the budget is used in personnel costs. And so we're going to talk about our compensation. Plan for the— what we've done in the past and what we're planning on doing in the future, and some of the metrics that we've found from sister cities. Um, but one thing I wanted to mention to you all is how much we appreciate, as employees as a whole, of how much you, uh, appreciate the staff and what we do for the city, and, and helping us to pay a fair, fair wage so that we can provide the best services that we can to the community. So we appreciate you making that one of your areas of focus, is a skilled and talented workforce. And as always, we try and make our current and existing employees our number one priority when we're looking at compensation before we look at any expansion. Some of the drivers in the increase to compensation, uh, mostly has been driven by police and fire wages. Nationwide, those wages have been increasing skyrocketing paces. Seeing it temper just a little bit, but they are still outpacing all other employee groups. And then also medical insurance, we've seen double-digit increases in insurance the last few years, which most agencies and public sectors have seen the same. So with that, I just want you guys to know how much time Jennica puts into these compensation researches. She does such a thorough job in looking at this at least twice a year, and we're very thoughtful in being fiscally responsible in the recommendations that we give.

So with that, Jen, go ahead.

Thank you. So I'm just going to explain a little bit of our process and how we determine compensation increases for our employees. So Like Carrie mentioned, for the past few years, we've really tried to make it a focus that we're doing these regular market surveys, that we're not just waiting for every 5 years to see how are we doing compared to cities. We're looking at it twice a year, every position in the city.

Interesting.

So we look at every single position in the city and then look at a core group of comparable cities. And it's really the 10 largest cities in Utah, plus Salt Lake, Utah County, the state. And then for public safety, we also have a few additional entities. we look at. And then for positions that may be more unique, we can look outside of this group as well, but we kind of focus it on this because that's really the market that we compete in within the state and locally. So we utilize what's called TechNet, and it's a database where all entities input their positions as job descriptions, salary ranges, actual pay information. We verify that with their budget documents, with their human resources department, make sure that they're comparable positions, look at their benefits as well. That's part of the database. And then we want to make sure each of our positions is within market. So we're really looking at it individually. Kind of in the past, what was done is kind of just across the board, everyone's getting a certain percentage market, or a lot of entities would be considered a COLA increase. And then there's a set merit. But we really look at individual positions because we want to allocate those budget dollars to the positions that that need them most. For example, recent years it's been police and fire have had those really competitive within the cities and statewide, nationwide. So we look at that to make sure we're within the market. And then when there's a position that's lagging or we are seeing trends that that's increasing, we will recommend or consider budget market adjustments for that position. So this is probably small for you, But this is kind of an overview of what other cities do. And some of them are kind of that traditional, they just give everyone kind of the same set increase. Some are very variable. I would say most of them, even in these percentage numbers that may not reflect what they did, they may have given more to public safety, but this is kind of generally what they did this last fiscal year for employees. So we're kind of seeing anywhere from 1% to 11% total increases among cities. Obviously, that doesn't reflect everything because we don't know exactly where they were to start with, what their strategy is, where they want to be in the market. But we're kind of seeing that, I mean, wages continue to increase significantly. And as we do those market studies, we're really able to see where that is. So for us, again, we kind of were across the board based on the market study. So every position in the city is eligible for a 3% Typically merit or step increase depending on if they're in the step program or just a regular merit employee. And then in addition to that, targeted market adjustments were given to certain positions. So for kind of our traditional employees, certain positions had an increase at one point or another during the year. Other positions have not. But in last July, there was a 1% average for those those positions outside of sworn police and fire. And then in March, we also made an additional adjustment based on an additional market study for certain positions. And then our sworn police, we looked at that kind of after last fiscal year started just to see where we're at. And based on that, there was a larger increase for our— the majority of our police officers last October. And again, all of these positions are also eligible for their 3% annual merit or step increase.

Thank you.

So that's where the 10% comes from. And then for our fire, there was certain positions that received adjustments last July. And then again in March, there was an additional kind of across the board, but targeted by position increase for our sworn fire. So ours is kind of convoluted, as you'll see.

But yeah.

So this is going to just sound probably not too intelligent, but so I'm just looking at this and I'm just breaking it down super easy. Easy, simple. Probably shouldn't be, but so I'm looking at market. Several are COLA, and, and then there's a few that are market. So if we're always going out to market, are we just making adjustments based on other cities' COLA adjustments? Do you see what I'm saying? We're taking into it— they're, they're, they're doing COLA, right?

Right.

And then we're using their Merit COLA combo for our market, and then we're doing merit on top of that, or in addition to that.

Correct. But it's really just ranges we're looking at, and they also do merit increases on top of their market increases.

And then do they decide their COLA every year, or is it based on CPI?

How do they do their COLA?

I don't think any city does actually CPI because I don't think any city they can actually afford that. Okay. Um, they, they call it cost of living.

Whatever they decide. So these are not based on any metric or index?

I mean, they consider that. A lot of them say, yeah, we're looking at CPI, but a lot of times it's just what budget availability. And some of them are just like, this is traditionally what we do. So thanks.

I would also say another nuance that is included though by going and looking at market is Every city has turnover and/or promotions too. And so when someone's promoted or when someone's hired, they may negotiate a different salary than the person that was in their spot beforehand. And so looking at targeted market increases takes that into account as well.

Okay.

Plus, we're not playing the game we were playing with police back in 2020 where it was just everybody just trying to top everybody else.

It just got out of control.

I do think there's some of that still, but I, and Chief, you could probably speak to that. I do feel like it's plateauing a little bit. It's still increasing, but I think it's still kind of in a plateau. I think that both cities are filling that pinch that we are now. I do think we're stabilizing. I think the issue that we have more than that is the pool of applicants that are interested in going into policing. police work, that, that's really limiting the pool of people.

Yes, and I would say that's also put pressures on the wages too, to attract not just the competition with other cities, but the size of the pool of applicants in your specific fields.

Not a— there's not one single solution.

Um, I would say pay is part of it. I'd say the job is part of it. So there's a lot of factors that are making it difficult.

And that was part of what we had tried to fight that in 2021, or to push against that, was our culture, our department culture. Wanna come?

Outstanding that it's still a challenge.

Still very challenging. Okay, good to know.

I would say one advantage that we do have too is our hybrid step program where every 3 years they have an opportunity to get a super bonus. But we also get a higher skilled workforce too with that super bump. So we benefit from pushing people through the ranks a little bit quicker, but we also have higher trained, higher certified police and fire personnel in the seats, which is the ideology we decided.

Okay.

And then for this upcoming fiscal year, what we're budgeting and planning for, Is to conduct an additional market study this fall. So with just wrapping up recent adjustments, we feel that that will be a good time that we're going to be able to know exactly what other cities do. Because right now, as we talk to other cities, it's still a guessing game. They're like, oh, this is what we're hoping for, but we don't know what we're going to have. So that's going to enable us to be able to know exactly what they do and allocate those funds where they need to be spent for those positions that need it most. And so we plan to kind of do this, a similar thing where we're implementing targeted market adjustments. later this calendar year or early next calendar year. This will also align market increases to positions with our health insurance premium increases. So if employees are experiencing an increase, as Carrie talked about, we've seen really large increases to our health and dental, and some of that is shouldered by employees. But this will align, making sure that that's part of, you know, if they have a market adjustment, that helps soften the blow. And then And funding merit and step increases, we are able to work within our budget to fund those and our career ladder increases to make sure that employees can progress quickly throughout their career. So it's, yeah, really kind of a similar process and it's, I think it's a lot more responsive than we've been in the past and aggressive to make sure that we're able to recruit and retain employees. So I just wanted to really quickly touch on a few other things that we do that we consider as part of compensation or the employee experience. So one big thing we've tried to emphasize with this focus on doing market studies is being really transparent with employees and departments. So going around to departments, sharing with them, you know, this is exactly why we're making the changes we're making. They can see exactly the cities that we're comparing to, what their pay ranges are, what ours are. So they know that, you know, we're being fair and transparent and can understand why we make the changes we do. We've really also tried to focus on career development for employees. So this includes trainings for our employees and supervisors, the career ladders again, certifications and opportunities offered through that, and then providing tuition reimbursement and Babbel scholarships, making a greater effort to solicit and address employee feedback through our anonymous Babbel box and employee surveys, enhancing our benefits where we can. So this last year there We made improvements to our hybrid PTO program and also paid leave benefits that were really well received by employees. And then one thing we're really excited about this upcoming few months is the employee health center for our employees and their families. So that will be huge for employees, and it's not part of, you know, their take-home pay, but it's a really significant aspect of compensation and well-being as well. So I know that was kind of rapid fire, and that's a lot of information there. It is a very big expense.

So any questions about Thank you for taking care of our people so well.

Yeah, I'm excited about the well health home.

Yeah, it's gonna be great.

Agreed.

Awesome.

Right, is that everybody on this? Um, next, do we cover— let's see, Brandon, Jack, Carrie, Jenica. Okay, anything else for item 1.2?

I probably just need to say real quick concerning Carrie and Jenica, as you can— as you've been able to experience even today, it's hard to take a lot of financial data and detail and articulate it and share it and, um, and do it in a transparent way where everyone can kind of understand and digest it. Um, how Carrie and Jenna could relay our compensation to our employees is second to none. So I just want to highlight that that really has been a big deal in helping us.

Thank you.

Improve our employees' confidence that you as a council do make them priorities critical to what we do.

Yes, that's— sometimes all of that can get mysterious when you're a new employee, of all this, the steps and the this and the that. And so, yes, made that very clear. Thank you. All right, holy arts and recreation here.

Wow.

All right, have to go big.

So you gave us— we, uh, we have this.

You do.

And we will touch on that in a—

oh, is that different?

So this part, if you look at the front page— yes, that document.

Yes.

Front page.

That document, that will be this. They're different.

I will explain why.

So what you see here are our mini and mid-major grants along with our major grants. So it's the art side, not all of the art side, but the part where we ask for applications from our different organizations throughout What we use this for is when we have our meetings with each of the applicants, all of the mid and mid-major applicants, then we, we use this as a barometer for helping us determine what they've received in the past, who has applied in the past, and what they have been awarded in the past.

Okay.

This year we also developed, with the help of our council members here that are liaisons to the commission, a matrix which we were able to use in helping us determine, based on the commission members, where they felt like— they felt like those dollars should go. You'll notice Down at the bottom there on the far right side under the proposed award, that $143,000 right here, and comparing that to where we have. We went— I went back over the past 5 years and identified— you'll find this hard to believe, I'm sure— sometimes we award people money and they don't actually submit to use it. So we had an accumulation of unawarded or awarded money that was never used. So we decided that this would be a great year to use those funds because they are still related to our arts side components. So we've— so that's why you see an increase in that particular element. Also to note on this particular uh, full summary. Um, the commission— and I just want to point it out because, uh, this $1,000 Better Together item, that was not part of the commission's original, uh, proposal submission. Um, Council Member Meekham here received some additional information, so I'll, I'll let him maybe talk about that particular element as to why we included it on this spreadsheet.

So in other words, they didn't fill out an application?

No, they did. They applied. They were not able to come to and do a presentation during our meetings for presentations.

They provided their information offline.

Okay.

So our—

we had a full proposal, but our commission wasn't able to hear them. Real fun.

Well, I, I—

we just reached out to the Commission. Uh, I just want to acknowledge Dawson Richmond, who's here. He's one of the members of our Care Advisory Commission, uh, who, who helped us with this list.

We would like to see Tom's thing.

Yeah, come on up.

Thank you.

Yeah, awesome.

In fact, Dawson, it would be great if maybe Brandon, if this is a good time for him to just talk a little bit about the process of how the Commission work to come up with these numbers?

Well, under duress.

Uh, the commission, what we did is we, uh, thanks to Trevor Bell, um, and his, uh, Excel skills, we came up with this matrix that helped us with, um, with making the decisions. What we did is we all had our own spreadsheet. Um, everybody had the same, had the same copy. Um, we got— our copies were all our own individual copies. What we would do as we were listening Listening to these presentations, as we would go in and we would input the amount that we thought that they deserved. And then all of our spreadsheets at the end collected into one spreadsheet that showed all the averages we'd all submitted. And with that, then we were able to kind of get a gauge for how everybody else was feeling. And then we would discuss if there was, if there was a big variance, we could see that somebody had submitted maybe $1,000, someone had submitted $8,000 for one grant, for example. Then we would discuss why, as to why we felt that way, and then we would come to a decision as a, as a, as a commission. So I thought the process went pretty well, and it was, it was good. We all, we all felt good about all the, all the numbers.

So keep in mind, it is not a requirement to present at to the Commission. Obviously, we highly suggest it. It helps the Commission members determine those things when they're like this, especially this year with a matrix. And so one of the ways that they're able to then make those judgment calls is by having that ability with presenter there to be able to ask questions or get clarity on that organization. So I think that particular process was— went really well, and we really appreciated the commentary that everybody had with each other while we were in those, if you'll call them negotiations, those discussions. Because you can see, you know, we had $333,000 in ask, and we were only able to award about $100,000. Well, award $143,000 based on the amount of money available. Um, I mentioned Better Together. They were one of the groups that were not able to be at— to come present. Um, the individual who is and does that runs the Honey Baked Ham store, and he was preparing for their new grand reopening.

That's right.

So he was not able to come. And, uh, he then, um, I don't remember if he said— did he send the stuff to you, Councilmember McComb?

Yeah.

So he sent some information to show when they put it on, that you see the $1,000 in the prior year. Um, he sent some information around that. And so then, um, it was— we had a discussion, and then I, you know, Councilmember Gale and Councilmember Meekum have said, you know, I think, I think for $1,000 we can, we can go ahead and add them. Um, and then I don't know, were you able to get a hold of any of the council members besides Dawson?

Dawson responded.

Yeah, so, so that's why you see them on. I just wanted to make sure you knew that That was the one, if you will, exception to the proposal that came out of the Advisory Commission. After those, we don't— and we've had some discussions about some changes that we'll look at in the next year. But then we also have our major award group entities that are down there at the bottom. The application for Sierra, that $1,071,000 is based on their application and based on a maximum of 35% in relation to their operational expenditures. And Utah Metropolitan Ballet, and to be honest, they received $25,000 for a long period of time. I haven't had a chance to go back and verify how long, but it's been a long time.

It's been a long time.

I mean, I was one of the first citizens on the CARE Commission, and that's about where I was on the—

yeah, how did we determine 143 for the small— I'm sorry, did you want to interrupt?

No, no, no.

Okay, on the mini and mid-major grants, how do we come up with a maximum of 143?

So, um, we usually try to target in the $120-ish neighborhood in the past. And so based on just the volume that we've been receiving, particularly you can see the last couple years in particular, we felt like, what can we do to, to push that dollar a little bit higher? Um, is there a way that we can potentially do that? It's usually almost reverse engineering. So if we kind of go to that spreadsheet that was handed out to you, you can see all of the awards that were on there. Then you come down, and then I have to back into what do I think is my estimate of the CARES dollars that we are going to receive. Then we kind of do a reverse engineering. We kind of go, okay, we, we have SIRA, and we've generally always awarded them the amount that they have applied for. I got the Metropolitan Ballet, and then these other items that come from various requests from our Recreation and/or, in this case, you know, Bryce and his team. And then that kind of gives us an idea of how much, if you will, is available.

Okay.

For those, if we were to adjust that, we would— that heart of downtown item, you're going, gosh, $463,000, $437,000, that's a pretty weird number. It's a plus. So basically, we've said, here's where we feel comfortable. What do we have left? We'll put that towards heart of downtown.

I'm offended at plug.

I just wouldn't—

Yes, it's plugged. Yeah, I mean, the goal is to try to get it around $500,000, as close as we can.

But that said, um, you will notice So you might ask— so you'll notice, and yes, I, I do know how to do math, and, and arts and rec are supposed to be 50/50. You'll notice the $1,802, and rec is not $1,802. So you'll recall when I mentioned we had those surplus unused funds, so that's where that difference comes in, is we are—

you—

those funds You will, surplus and in our reserves. So that's why Artsite is receiving, if you will, an additional $50,000, is because it never got used in the first place.

Okay.

So that's why they cut it.

On the co-sponsored groups, what's that money for? $50,000, what's that going to be used for?

Tyler, do you want to talk about the co-sponsored?

So our co-sponsored sports groups, we've got like Orem Youth Baseball and soccer, and we invest in capital improvements to help improve those playing surfaces and increase the betterments that they play on.

So in the past, we've used some of that money to buy like the robot turf painter to help give them the crisp, perfect lines on the fields and things like that. So there's a little bit of money that we invest into that program every year. And that's—

Okay. Thank you.

So what's our percentage art to rec?

It's technically 50/50. 50/50.

Okay, this year we're good at 50/50. Some years we kind of did— we're going to do 64, but next year we're going to do—

And to your point, yeah, so that was where we got out— maybe you got out of balance a little bit, and so we had to do that a little bit. There is that $50,000 is kind of that same concept. It's kind of righting that ship a little bit.

Okay.

Um, so, and you can see here are the, the items that we discussed with our Parks and Rec folks in relation to the rec side of the house. Um, you know, Lakeside Park, the, the playground down there is pretty small for such a facility that gets used pretty heavily. So they want to do some pretty serious stuff down in that area. We haven't determined an exact park. That's why it just says park. But, you know, we're looking at a pup track in relation to one of our parks in the city. Also doing— I have no idea what an RC crawler and basher course is other than it sounds cool— Down at Springwater Park. That's the one down across from the water treatment plant. Um, Library Gardens, that would be the park over here in the middle, uh, between them. And then the Bonneville Sports Court, um, and a couple of other— the dog park and Rainbow Bridge, which up the canyon, as well as, um, doing some stuff to the Orem Elementary softball, uh, dugouts. And that's where CARE currently is. I don't know if either of you have any comments you want to make.

Uh, Mayor, Oh, what if—

I mean, our— by far our most consistent grantee is Sarah, and Adam's here.

Oh, hi, Adam.

I am so sorry, I didn't see you there. Welcome.

Hi.

As you know, Sarah has been on a tear. A lot of great— they're doing great things. Uh, the, the proposed award for Sarah this year was about $120,000 more than last year. And so I had reached out to Adam just to see if he wanted to share, um, some of the uses for that increase, uh, with the council while we're— if we have time and if you're interested.

Okay, yeah, yeah, we've got— what is that, my brain—

13 minutes?

You want to take a few minutes, Adam?

Well, what you're—

yeah, thank you. What you're really seeing there, as you know, So we— you take the full expenses of, of CIRA, for example, you take away the non-qualifying expenses and you have left qualifying expenses, and you can ask for 35% of that. So what that increase really is showing you is not more sort of going forward, but a true picture of expenses from last year. And, uh, and so as you look at that year over year over year, you, you see that continually, that continued growth. And I I think many of you longtime attendees can, can, uh, speak to the, the quality, how it's continued to go up and up and up. The number of programs continue to go up and up and up. Our attendance is growing, growing, growing. So, uh, you know, what that really is showing you is, is an actual expense, uh, that, that is in a qualifying area. Um, when there has been less money, you know, historically CIRA has to not improve in facilities and rock, bricks and mortar as much and put that towards programming. When there's been more money for programming, we've been able to, you know, at the same rate of increasing and accelerating programs and offerings and quality, we've been able to make many improvements to facility as well. So, you know, you're, you're, look, you kind of have to look at the whole picture of of this airplane taking off. And as we continue to do more, we're going to continue to qualify for more, and you're going to continue to see the programs in, you know, attendance, the quality of the programs, the quantity of the programs, and so forth. So I think that's what you're really looking at in that number, not necessarily a dollar-for-dollar return on investment going forward in that difference, but in What actually happened last year is what is the difference in that number. Thank you.

I apologize, I didn't even see you back there.

Oh, I snuck in.

You were sneaky.

Can I—

Questions?

Oh, I just want to make a comment about Adam if I could, something that I just learned this year.

Um, so Adam does an amazing job, as we all know, with the SARA, but I've also learned that he is very kind and helpful in offering his experience and resources to a lot of the other people that are on the team.

There's a list.

And, uh, for instance, our friend at Honey Baked Ham, you know, Adam has been very helpful in helping him get going.

And so I, I just want to say thanks to Adam for not only the great work that you do at CIRA, but the great work that you do in the community at large.

Lift all of us.

Well, I, I've talked to Brynn about this. I, I know I'm not technically a city person, but I feel like I wake up every day with the same goal and aspirations that you all have, and that is make Orem better.

Mm-hmm.

And, and, uh, and so, you know, that's, that's what we aim to do. And, um, you know, I, I, I think again, those of you that attend regularly can, can say and, and maybe speak to the, the number of improvements you've seen both in facility and in programs. and, and everything. And that's directly related to the support you give to Sarah. So thank you very much, and, and we, we greatly appreciate it.

Well, we appreciate what you give to our community.

Yes, it's amazing.

All right, anything else?

I would be remiss if, uh, as Dawson mentioned, if I didn't, uh, at least share my appreciation for Mr. Bell in the back here. I would probably have had stones thrown at me or people significantly rolling their eyes or shaking their head if it was not for Mr. Bell, especially in our meetings and all of these, you know, getting everything, setting everything up. Dawson mentioned the spreadsheets and those cave matrix and everything like that. So I just wanted to publicly express my appreciation for everything he did in this.

Thank you.

In this regard as well.

Can I ask, is our— are these applications for these groups on our transparency portal?

I don't think—

How do they have transparency applicants so people can learn about them?

I think some of these I'd like to find out what they're doing and go to their events. So do they have websites or—

I don't even— I don't know what the transparency— like when we talk about that, I don't know what that means.

We can't talk about the transparency.

Maybe I have to—

I'll be telling you about that.

You have to wrestle with it.

Do you think, Pete, we could advertise some of these on social media?

Yeah, so the Arts Council, uh, so if everybody— if all of you are okay with the, um, this Proposal, then what would happen is in our April 28th council meeting, we would be then coming forth, uh, basically somewhat reiterate showing this exhibit that you just received, um, and then you would pass an ordinance that makes that— makes it part of that ordinance approval.

Council, if you have any questions or anything on that, I contact you.

Yeah, Trevor or myself, either one.

And thank you.

Especially thanks to our Advisory Commission. I thought they knocked it out of the park.

Thank you.

Yes, and your Commission.

It's not easy allocating money when there's so many more— there's so much more need than money available. For sure.

We wish we could have given everybody 100%, but unfortunately it just wasn't realistic.

But it was a fun experience for sure.

Let me just say one more thing before I get in my car and kick myself for not saying it. And I'm sure you've heard this with all the mini and mid-majors as well. I mean, if we do nothing different and not add one more program, just like you've heard for the last how many hours, costs are going up dramatically. And, and, and it— and we've definitely seen that in our— and it's, it's hard to even get an entry-level person when In-N-Out's paying $17 an hour to flip burgers, you know. So, I mean, anyway, it's just— it's, it's a really tough climate to keep things going at the same rate. So anyway, I, I think you, you probably have heard that on many occasions, but I think every agenda item had some, some iteration of that today.

Yes. No, it's good to know if that is well in the arts.

And, and I— we don't have any salaries or anything in care. We do have independent contractor fees, which is like concerts and, and those kind of fees, but, but I mean, even those rates are Nothing like they were 10 years ago, for example.

So, all right.

Is there anything else? Is that like— all right. So I guess, do we need a motion to adjourn our work session, or can we just go?

Yeah, you can need a motion.

Normally we just leave.

Okay.

I was just gonna leave to bug Steve, but I guess we are adjourned. Okay, I'm gonna give the stink eye to whoever says no.

Aye.

Follow vote.

All those in favor?