Aug 08, 2025 City Council Work Session

[00:00:03]

LOSE. PAUL. PAUL. MR. HAUSER. GOOD MORNING. IT IS AN 838. I CALL THIS MEETING TO ORDER. THIS IS THE CITY COUNCIL WORK SESSION. IT IS FRIDAY, AUGUST THE 8TH, 2025. FIRST ORDER OF BUSINESS IS TO HEAR ANY PUBLIC COMMENTS ON AGENDA ITEMS. SO IF YOU'RE IN THE AUDIENCE AND YOU'D LIKE TO ADDRESS THE CITY COUNCIL, PLEASE COME TO THE PODIUM AND WE'LL HAVE THREE

[Discuss Fiscal Year 2025-26 Budget]

I'LL GO AHEAD AND GIVE YOU OPEN UP WITH MY COMMENTS AND THEN I'LL GET OUT OF THE WAY AND WE'LL TURN IT OVER TO MR. HOLLOWAY, WHO WILL INTRODUCE OUR GUESTS AND KIND OF DRIVE THE MEETING FROM THERE. SO IT'S WITH A STRONG SENSE OF CONTINUED PROGRESS THAT I PRESENT THE BUDGET FOR THE UPCOMING 2526 FISCAL YEAR ENDING SEPTEMBER 30TH OF 2026. AS ALWAYS, I BEGIN THESE REMARKS WITH A SUMMARY OF THE ROLE AND PURPOSE OF BUDGETS IN OUR WORK TOGETHER. AND WHILE IT MAY BE A BIT REPETITIVE FOR YOU, I ASK FOR YOUR PATIENCE. I THINK IT'S IMPORTANT FOR THE PUBLIC TO HEAR THIS SUMMARY FOR CONTEXT. LIKE ALL BUDGETS, THIS ONE REPRESENTS A POINT IN TIME THAT CAPTURES WHAT WE UNDERSTAND TO BE THE PRIORITIES OF THE CITY COUNCIL. NAMELY, IT IDENTIFIES THE RESOURCES NEEDED DURING THE NEXT FISCAL YEAR TO ENSURE THAT WE CAN SUCCESSFULLY CARRY OUT THE STRATEGIC PRIORITIES SET FORTH BY THE COUNCIL. IN YOUR FEBRUARY STRATEGIC GOAL SETTING MEETINGS, AND FURTHER DETAILED IN THE STRATEGIC GOALS THAT YOU ADOPTED ON MAY 6TH. I KNOW THAT THERE ARE A COUPLE OF YOU HERE THAT WERE NOT ON THE COUNCIL AT THAT TIME, BUT THAT IS THE PROCESS THAT WE FOLLOW EVERY YEAR, AND WE WILL CERTAINLY RECOMMEND THAT GOING FORWARD, MUNICIPAL BUDGETS ARE FUNDAMENTALLY A REFLECTION OF A POLITICAL PROCESS IN WHICH THE ELECTED OFFICIALS OF THE COMMUNITY SIGNAL THEIR POLICY PRIORITIES BY LITERALLY AND FIGURATIVELY PLACING MONEY WHERE THEIR INTERESTS LAY. IF POLITICS IS FUNDAMENTALLY ABOUT WHO GETS WHAT, WHEN, WHERE AND HOW MUCH, THEN THE BUDGET IS THE PRIMARY TOOL IN WHICH WE MAKE THE POLITICS WORK IN A LOCAL COMMUNITY, USING PROFESSIONAL AND TRANSPARENT PROCESSES. EACH BUDGET YEAR PRESENTS ITS OWN DISTINCT ENVIRONMENT, A UNIQUE BACKDROP AGAINST WHICH OUR FINANCIAL PLANS ARE SHAPED. THE LAST FOUR BUDGETS, FOR INSTANCE, HAVE NAVIGATED A REMARKABLE RANGE OF CHALLENGES, FROM THE IMMEDIATE CRISIS OF COVID 19 AND THE SUBSEQUENT HURDLES OF LABOR SHORTAGES AND THE GREAT RESIGNATION TO THE MORE RECENT PRESSURES OF HIGH INFLATION AND RISING INTEREST RATES. DESPITE THESE VARYING ECONOMIC LANDSCAPES, WE'VE CONSISTENTLY AIMED TO MITIGATE THE IMPACT ON OUR TAXPAYERS. OUR PROPOSED EFFECTIVE TAX RATES DURING THESE PERIODS HAVE GENERALLY TRACKED THE CONSUMER PRICE INDEX. WE BELIEVE THIS COMMITMENT IS CRUCIAL IN EASING THE BURDEN ON RESIDENTS AND BUSINESSES. THIS COMMITMENT ALSO DRIVES US TO CONTINUOUSLY SEEK PRODUCTIVITY IMPROVEMENTS AND INNOVATIVE WAYS TO DELIVER ESSENTIAL SERVICES OF EXCELLENT VALUE FOR OUR COMMUNITY. NOW FOR A LITTLE NATIONAL AND REGIONAL CONTEXT.

WHICH SORT OF MIDWIVES ALL LOCAL BUDGETS IN SOME FORM OR ANOTHER? THE UPCOMING FISCAL YEAR 26 BUDGET ENVIRONMENT IS SHAPED BY A COMPLEX INTERPLAY OF NATIONAL AND STATEWIDE ECONOMIC TRENDS.

NATIONALLY, THE US ECONOMY HAS SHOWN RESILIENCE, THOUGH WITH SOME MODERATION. REAL GROSS DOMESTIC PRODUCT SAW A SLIGHT DECREASE OF 0.5% IN THE FIRST QUARTER OF 2025, AFTER A 2.4% INCREASE IN THE FOURTH QUARTER OF 24. INFLUENCED BY INCREASED IMPORTS AND DECREASED GOVERNMENT

[00:05:03]

JUST RECENTLY, IT WAS REPORTED THAT COLLIN COUNTY IS FAST BECOMING THE HEART OF THE STATE'S TECHNOLOGY DRIVEN ECONOMY. THE TEXAS ASSOCIATION OF BUSINESS REVEALED THAT BY 2050, COLLIN COUNTY ALONE WILL GENERATE MORE ECONOMIC OUTPUT THAN SEVERAL U.S. STATES. OUR PLUG AND PLAY INITIATIVE FOR, AS ONE EXAMPLE, IN WHICH THE MEDICI, IN PARTNERSHIP WITH FRISCO, PROVIDES CUSTOMIZED BUSINESS ACCELERATOR SERVICES AND ACCESS TO THEIR NETWORK TO VENTURE CAPITAL AROUND THE WORLD. THAT'S JUST ONE EXAMPLE OF HOW WE'RE HELPING IN THAT EFFORT. WE ARE WELL POSITIONED FOR THE ROBUST GROWTH IN NORTH TEXAS TO CONTINUE. OUR CHALLENGE WILL BE TO KEEP UP AND BUILDING THE INFRASTRUCTURE. NAMELY ROADS, UTILITIES, PUBLIC SAFETY, PARKS AND RECREATION, ETC. TO SUPPORT THIS GROWTH. BY FOCUSING ON THESE PUBLIC GOODS WHEREBY FUTURE GENERATIONS WILL REAP THE BENEFIT OF INFRASTRUCTURE, WE CAN LET THE FREE MARKET FLOURISH AND CREATE THE CONNECTIONS NECESSARY FOR SOCIAL CAPITAL TO THRIVE. NOW, THIS YEAR, WE'RE PROPOSING A BUDGET OF $232.1 MILLION IN THE GENERAL FUND, WHICH SERVES AS THE CITY'S OPERATING BUDGET. OUR ALL FUNDS BUDGET, WHICH, AS YOU KNOW, INCLUDES ENTERPRISE UTILITY FUNDS, INSURANCE FUND, CIP, ETC. THAT TOTALS NEARLY $942 MILLION. WITH THESE RESOURCES, WE WILL CONTINUE TO FUND THE PROGRAMS THAT WE BELIEVE ARE CONSISTENT WITH THE CITY COUNCIL'S STRATEGIC PRIORITIES. SPECIFIC TO THE STRATEGIC PLAN YOU ADOPTED IN MAY, I WOULD LIKE TO HIGHLIGHT A FEW THINGS TO DEMONSTRATE HOW THE PROPOSED BUDGET ALIGNS WITH YOUR GOALS.

UNDER SAFE AND SECURE COMMUNITY, ONE OF THE STRATEGIC PILLARS YOU HIGHLIGHTED CONTINUED EMPHASIS ON FUNDING OUR POLICE AND FIRE FUNCTIONS. THIS BUDGET CONTINUES TO PRIORITIZE PUBLIC SAFETY AS A KEY DRIVER IN THE COUNCIL'S PRIORITIES. AS FURTHER SUPPORTED BY OUR BI ANNUAL NATIONAL CITIZEN SURVEY. SPECIFICALLY, THIS PROPOSED BUDGET ADDS FIVE NEW POSITIONS TO THE POLICE DEPARTMENT AND FIVE MORE FOR THE FIRE DEPARTMENT. WE HAVE TWO NEW FIRST POLICE FIRST RESPONDERS.

WE HAVE A NEW A NEW DETECTIVE POSITION, A NEW SERGEANT POSITION. WE ALSO HAVE A POSITION FOR NIBRS. THAT'S A THAT'S AN NIBRS SPECIALIST. THAT IS THE NATIONAL INCIDENT BASED REPORTING SYSTEM. IT'S RESPONSIBLE FOR THE DAILY REVIEW OF ALL INCIDENTS AND CASE SUPPLEMENTS COMPLETED BY THE MCKINNEY POLICE DEPARTMENT. WE HAVE TO BE ABLE TO ACCOUNT FOR AND ADMINISTER OUR CRIME REPORTING IF WE'RE GOING TO BE EFFECTIVE. SO SOMETIMES YOU GOT TO FILL BACKFILL THOSE POSITIONS WITH CIVILIANS AS WELL. WE HAVE FOUR FIREFIGHTERS AND ONE BATTALION CHIEF OF ADMINISTRATION AND SPECIAL OPS. CONSTRUCTION OF THE FIRE ADMINISTRATION, LOGISTICS AND STATION NUMBER TWO CAMPUS IS NEARING COMPLETION. THE BUDGET INCLUDES FUNDS FOR FINALIZING THIS PROJECT AND FOCUSING ON THE NEXT NEW FIRE STATION, WHICH WILL BE NUMBER EIGHT. THE RECONSTRUCTION OF NUMBER EIGHT. THE BUDGET ALSO PROVIDES FUNDING TO ENSURE THAT OUR HIGH CUSTOMER SERVICE FUNCTIONS WILL CONTINUE TO IMPROVE WITH THE USE OF MODERN EQUIPMENT, VEHICLES AND PRODUCTIVE TOOLS FOR OUR EMPLOYEES TO UTILIZE. WE HAVE $400,000 BUDGETED IN TIERS ONE FOR DESIGN ENGINEERING FOR FIRE RISERS AND RELATED INFRASTRUCTURE FOR OUR IMPORTANT TOWN SQUARE AREA, SPECIFICALLY, REED FIRE ENGINEERING HAS BEEN

[00:10:04]

THAT'S THE THIRD STRATEGIC PILLAR THAT WE'RE GOING TO SPEAK ABOUT. SPECIFIC TO THIS, YOU EMPHASIZE THE NEED TO FOCUS ON FIRE PROTECTION AND SUPPRESSION IN THE HISTORIC DOWNTOWN AREA, AND FOCUS ON TRAIL CONNECTIVITY IN OUR PARK SYSTEM. WE'VE ALREADY SPOKEN ABOUT THE FIRE SUPPRESSION IN DOWNTOWN, BUT WE'VE ALSO GOT $7.1 MILLION OF FUNDING FOR PARKS TRAILS, INCLUDING GRANT FUNDS FROM COLLIN COUNTY, WILSON CREEK, $5 MILLION. ROWLETT CREEK, $1.5 MILLION, COTTONWOOD CREEK, $600,000. THIS BUDGET ALSO PROPOSES TO ADDRESS OUR COMMUNITY NEEDS THROUGH A PER CAPITA APPROACH TOWARD COMMUNITY PROGRAM FUNDING. THIS WAS NEW IN THE FISCAL YEAR 23 BUDGET, AND WAS INTENDED TO BRING MORE CLARITY AND PREDICTABILITY TO COMMUNITY FUNDING FOR THE PROPOSED BUDGET. THIS AMOUNT IS $3.42 PER CAPITA, WHICH IS ABOUT $781,000, AN INCREASE OVER OVER 675,000 FROM LAST YEAR'S BUDGET. UNDER THE OPERATIONAL EXCELLENCE PILLAR, WE OFFER THE FOLLOWING NEW AND REPLACEMENT EQUIPMENT FOR OUR PUBLIC WORKS AND PARKS AND RECREATION DEPARTMENTS. NEW IT SOFTWARE EQUIPMENT AND INCREASED EFFORTS TO ENSURE FAIL SAFE CYBERSECURITY. LAST YEAR, WE MENTIONED THE IMPLEMENTATION OF A NEW POLICE BODY AND CAMERA SYSTEM, WHICH OFFERED US A MORE SECURE STORAGE AND INTEGRATED ENVIRONMENT THAN THE INCUMBENT SYSTEM. THIS YEAR'S BUDGET INCLUDES MORE UPGRADES TO THAT CAMERA SYSTEM, ALL KEY INTERNAL SERVICE FUNCTIONS THAT HELP KEEP OUR ORGANIZATION RUNNING, FUNCTIONING AND LEAN FUNDING FOR THAT CONTINUES. MR. HOLLOWAY'S UPCOMING PRESENTATION WILL FURTHER ILLUSTRATE HOW WE COMPARE WITH OTHER COLLIN COUNTY CITIES WITH RESPECT TO PRODUCTIVITY AND THE NUMBER OF RESIDENTS SERVED PER EMPLOYEE. PROVISION IS MADE IN THIS BUDGET TO CONTINUE DEVELOPING A MORE COMPREHENSIVE AND UNIFIED DATA MANAGEMENT SYSTEM, OR DATA LAKE AS IT'S REFERRED TO. THE PURPOSE IS TO MARSHAL OUR DATA RESOURCES, TO ORGANIZE AND MINE OUR DATA FOR BETTER DATABASE DECISION MAKING. THE BUDGET CONTINUES TO FUND A REDUCTION IN OUR FUNDING. I'M SORRY, OF OUR SERVICE LINE REPLACEMENT PROGRAM, WHICH IS PART OF OUR EFFORT TO REDUCE NON-REVENUE USAGE OF WATER. BY WAY OF REFERENCE, TEN YEARS AGO, THE CITY'S WATER LOSS WAS AT 24%.

WATER LOSS, MEANING UNBILLED OR NON-REVENUE WATER. NON-REVENUE WATER CAN HAPPEN A COUPLE OF DIFFERENT WAYS, BUT GENERALLY IT WAS HAPPENING BECAUSE OF WATER LOSS LEAKAGE IN VARIOUS AREAS, 24% WAS SIGNIFICANTLY HIGHER THAN THE BENCHMARK. FIVE YEARS AGO IT WAS AT 12%, AND TODAY WE'RE AT ABOUT 7.5%, WHICH IS ACTUALLY BELOW THE BEST PRACTICES INDUSTRY BEST PRACTICES USUALLY IS AROUND 8 TO 10%. THESE HAVE BEEN MADE IN PART BY THE COUNCIL'S SUPPORT FOR THIS PROGRAM, AS WELL AS SEVERAL TECHNOLOGY INVESTMENTS OVER THE PAST DECADE THAT HAVE ENHANCED OUR ABILITY TO FIND AND REPAIR MAJOR AND MINOR LEAKS. I'D BE REMISS IF I DIDN'T MENTION THE STRATEGIC PILLAR. MAXIMIZE THE IMPACT OF MCKINNEY NATIONAL AIRPORT. CONSTRUCTION IS UNDERWAY FOR OUR NEW PASSENGER SERVICE TERMINAL AND RELATED INFRASTRUCTURE, INCLUDING TAXIWAYS, APRON, AND ACCESS ROADS. THE BUDGET INCLUDES FUNDING FROM THE CDC, MEDICI, TRES TWO AND THE CITY TOWARD THE ABOUT APPROXIMATELY $80 MILLION NEEDED TO COMPLETE

[00:15:04]

MOREOVER, WE WILL CONTINUE TO EXPLORE THE OPERATING MODEL FOR LAUNCHING PASSENGER SERVICE LATE NEXT YEAR, AND WE'LL BE BRINGING THESE OPTIONS TO THE CITY COUNCIL OVER THE COURSE OF THIS UPCOMING BUDGET YEAR. THE AIRPORT WILL PROVIDE UPDATES THROUGHOUT THE CONSTRUCTION PROCESS TO KEEP THE COUNCIL INFORMED ON THE PROGRESS AND THE TERMINAL PROJECT. UPON COMPLETION OF CONSTRUCTION AND BEGINNING OF OPERATIONS, THE CITY COUNCIL WILL ALSO RECEIVE UPDATES ON THE AIRPORT BUDGET, INCLUDING INFORMATION ON AIRLINES, FLIGHTS, DESTINATIONS, OPERATIONS AND REVENUES EACH YEAR DURING THE BUDGET PROCESS. THE GOAL OF THE AIRPORT BUDGET IS TO CONTINUE TO FUND AIRPORT OPERATIONS WITH AIRPORT REVENUES. FISCAL YEAR 26 BUDGET PROPOSES USING FUNDS TYPICALLY TRANSFERRED INTO THE AIRPORT CONSTRUCTION FUND BALANCE TO COVER ADDITIONAL OPERATION EXPENSES, INCLUDING ADDITIONAL PERSONNEL AND MARKETING EXPENSES. AT ITS CORE, THE PROPOSED FISCAL YEAR 26 BUDGET, LIKE ANY FINANCIAL PLAN, REPRESENTS A CAREFUL BALANCING OF COMPETING PRIORITIES. WE METICULOUSLY CONSIDER THE NEEDS OF OUR EXPANDING COMMUNITY AGAINST THE REALISTIC LIMITATIONS OF OUR REVENUES. OUR GOAL WAS TO ENHANCE THE QUALITY OF LIFE FOR RESIDENTS WHILE REMAINING FISCALLY RESPONSIBLE.

ULTIMATELY, A BUDGET IS A CLEAR STATEMENT OF OUR COMMUNITY'S PRIORITIES. IT SERVES AS A POLITICAL INSTRUMENT SHAPED BY THE REPRESENTATIVE PROCESS AND A VITAL COMMUNICATION TOOL CONVEYING THESE PRIORITIES TO EVERYONE INVOLVED. MOREOVER, IT ACTS AS A SOCIAL CONTRACT, OUTLINING HOW RESOURCES, PROGRAMS AND PROJECTS WILL BE IMPLEMENTED TO IMPROVE THE MATERIAL WELL-BEING OF MCKINNEY AS DETERMINED BY YOU, THE CITY COUNCIL, ON BEHALF OF THE ENTIRE STAFF, THE ASSISTANT CITY MANAGER AND I BELIEVE THIS PROPOSED BUDGET SUCCESSFULLY BALANCES THE PRIORITIES SET FORTH BY THE COUNCIL. NOW, WITH THAT, I'M GOING TO TURN THIS OVER TO OUR CFO, MARK HOLLOWAY, AND OUR BUDGET MANAGER, TREVOR DAGAN, TO KICK OFF THE BUDGET PRESENTATION. LIKE I SAID, OUR FIRST PART WILL INCLUDE WATER. MR. HOLLOWAY WILL DO THE INTRODUCTIONS, AND THEN WE WILL GET IN WITH THE ACTUAL FUND BUDGETS ITSELF AS PART OF THE PRESENTATION. THANK YOU. THANK YOU, MR. GRIMES. MR. HOLLOWAY, THANK YOU. THANKS, PAUL. THANK YOU, MAYOR AND COUNCIL, IT IS OUR PLEASURE TO PRESENT THE PROPOSED BUDGET FOR FISCAL YEAR 26 TO YOU THIS MORNING. IT REPRESENTS MANY, MANY HOURS OF WORK AND EFFORT FROM PROBABLY HUNDREDS OF CITY STAFF MEMBERS. I'D LIKE TO THANK ALL OF YOU FOR THAT. I ALSO WANT TO THANK TREVOR DAGAN TO MY RIGHT HERE, AND PALOMA RODRIGUEZ AND TRACY PHELAN BACK HERE. TRACY IS THE NEWEST MEMBER OF OUR BUDGET TEAM, AND THIS IS HER FIRST BUDGET WORKSHOP. AND SO AND I ALSO LIKE TO THINK ABOUT A DOZEN DIFFERENT PEOPLE FROM FINANCE FOR HELPING US PRODUCE THE BUDGET. THAT'S BEFORE YOU. HERE IS OUR AGENDA FOR THIS MORNING. WE CAN GET THIS. THERE WE GO.

WE'RE GOING TO COVER MANY DIFFERENT AREAS, AND THERE WILL BE SEVERAL DIFFERENT PEOPLE TO HEAR FROM. TREVOR AND TREVOR WILL BOTH BE HANDLING SOME PORTIONS OF THE PRESENTATION.

AND I KNOW THAT BARRY SHELTON AND JENNIFER ARNOLD WILL ALSO COVER A COUPLE OF DIFFERENT AREAS. MOSTLY, THIS PRESENTATION IS VERY SIMILAR TO YOURS. BEFORE, HOWEVER, WE HAVE ATTEMPTED TO INSERT SOME NEW MATERIAL IN A FEW AREAS TO COVER SOME AREAS OF INTEREST FROM COUNCIL, SO PLEASE FEEL FREE TO ASK US QUESTIONS AT ANY TIME. AND IF I DON'T HAVE AN ANSWER IMMEDIATELY, I HAVE PEOPLE THAT ARE STANDING BY TO GET THAT ANSWER AND IF WE CAN'T GET IT IMMEDIATELY, WE'LL GET IT TO YOU IN THE COMING DAYS. SO THIS MORNING I WILL BEGIN THE PRESENTATION THE SAME WAY WE BEGIN EVERY YEAR BY BRINGING ATTENTION TO OUR BUDGET PROCESS AND THE STEPS IT TAKES TO GET TO HERE TODAY. I DO THIS TO HIGHLIGHT THAT WE FOLLOW THE SAME FUNDAMENTALS AND STANDARDS EACH YEAR TO ENSURE THAT ONE, WE'RE DOING THINGS CORRECTLY, AND TWO, WE'RE ENSURING CONSISTENCY AND CONTINUITY WITHIN OUR OPERATIONS. MANY YEARS FROM NOW, IN THE DISTANT FUTURE, I'M PRETTY SURE THAT THERE WILL BE A HOLOGRAM OF ME PRESENTING THE CIRCLE SLIDE. IT IS OUR BUDGET DEVELOPMENT SLIDE. ALWAYS START WITH IT AND IT ILLUSTRATES THE FIVE PHASES OF OUR BUDGET. THE FIRST PHASE, YOU CAN SEE THE TIMELINE THERE WITH PLANNING BEGINS IN JANUARY. IT INCLUDES THE STRATEGIC PLANNING DONE BY COUNCIL, ADOPTION OF THE BUDGET GUIDELINES, AND THEN WE RENEW OUR TEN YEAR PLANS DURING THAT PHASE. AS WE MOVE INTO THE SPRING, THE DEPARTMENT'S PLAN FOR THEIR UPCOMING YEAR AND IDENTIFY THEIR NEEDS AND PRESENT THOSE TO THE CITY MANAGER'S OFFICE, THE CITY MANAGER'S OFFICE, THEN DURING THE SUMMER, TAKES OVER AND MEETS WITH THEIR DEPARTMENTS. WE TALK ABOUT WHAT THEIR NEEDS ARE, AND NOW WE'RE

[00:20:04]

I MENTIONED EARLIER, LONG TERM PLANNING INITIATIVES, FISCAL BUDGETS ARE GENERALLY FOCUSED ON 12 MONTHS, BUT WE DO PLAN FOR THE LONG TERM INTERNALLY. SEVERAL YEARS AGO, WE CREATED TWO LONG TERM PLANS THAT I'LL THAT WORK TOGETHER. THE FIRST IS THE GENERAL OBLIGATION DEBT SERVICE PLAN THAT OUTLINES OUR TOTAL DEBT CAPACITY AND MAINTAINS OUR INS RATE GOING INTO THE FUTURE. THAT'S IMPORTANT AS WE TALK ABOUT OUR CAPITAL IMPROVEMENT PROJECT PROJECTS AND HOW WE WILL ALLOCATE THOSE OVER TIME, ESPECIALLY WITH OUR OUR BOND SALES AND OUR BOND PROGRAM. THAT LEADS US INTO THE GENERAL FUND PLAN, WHICH PROVIDES WE PROVIDE A TEN YEAR PROJECTION OF OUR OPERATING REVENUES AND EXPENDITURES, THEN MARRYING THAT WITH OUR GENERAL OBLIGATION DEBT SERVICE PLAN TO MAKE SURE THAT WITH ALL THE NEW THINGS THAT WE'RE GOING TO BE BUILDING, THAT WE CAN PAY FOR THOSE WITHIN OUR MEANS, THOSE ARE ALL BOTH FORWARDED TO THE CIP LEADERSHIP TEAM THAT HELP US DETERMINE WHAT SCHEDULE WILL BE ON AS FAR AS BUILDING ALL OF OUR CIP PROGRAMS, FOR INSTANCE, PAUL MENTIONED FIRE STATION THIS MORNING, THE REBUILDING OF FIRE STATION EIGHT. WE WILL PLAN FOR THAT IN OUR CIP GENERAL OBLIGATION DEBT SERVICE PLAN, AND THEN LEAD THAT INTO OUR GENERAL FUND PLAN TO MAKE SURE THAT WE CAN HIRE THE FIREFIGHTERS AS WE NEED TO OVER THE NEXT FEW FISCAL YEARS.

FINALLY, IN OUR PROCESS AND STRUCTURE OF HOW WE DO THINGS, HERE ARE SOME EXCERPTS OF THE BUDGET GUIDELINES THAT THE COUNCIL ADOPTS EACH YEAR. YOU ADOPT THESE AT THE BEGINNING OF OUR BUDGET CYCLE TO HELP US GET TO OUR PROPOSAL. AS YOU CAN SEE, THEY THEY ARE FAIRLY GENERAL IN NATURE. YOU KNOW, YOU KNOW, FULLY FUND A BALANCED BUDGET, CONSERVATIVE TAX LEVY, MAKE SURE THAT WE'RE PAYING POLICE AND FIRE AS WE ARE SUPPOSED TO, AND THEN MAINTAINING OUR FUND BALANCES AND RESERVES. WE ALSO TAKE INTO ACCOUNT OUR UTILITY FUNDS, WATER, SEWER, DRAINAGE AND MAKE SURE THAT OUR LONG TERM FUNDS ARE FINANCIALLY SUSTAINABLE. WE START WITH THOSE BASIC FUNDAMENTALS AND WE BUILD THE BUDGET FROM THERE. NOW, I MENTIONED RATE ADJUSTMENTS AND STUDIES, AND I KNOW IT KIND OF SEEMS OUT OF ORDER, BUT I HAVE ASKED DAN JACKSON WITH WILLDAN CONSULTING TO BE HERE THIS MORNING TO TALK ABOUT OUR WATER AND WASTEWATER RATES. WE'LL TALK A LITTLE BIT MORE ABOUT THE WATER AND WASTEWATER UTILITY LATER THIS MORNING. BUT DAN IS HERE NOW, SO WE TRY TO ALLOW HIM TO GO FIRST SO WE CAN TALK ABOUT THE WATER AND WASTEWATER RATES.

AND THEN HE CAN HE CAN GET ON WITH HIS DAY. AND WITH THAT I'LL QUIT TALKING ABOUT THE PROCESS AND, AND ASK DAN WITH, WITH WILLDAN TO COME TALK AND. THANK YOU VERY MUCH. I AM DAN JACKSON, VICE PRESIDENT OF WILLDAN FINANCIAL SERVICES, AND WE HAVE HAD THE PRIVILEGE OF BEING THE CITY'S WATER AND WASTEWATER RATE CONSULTANTS FOR ABOUT THE LAST 12 YEARS. NOW, I'M HERE WITH MY COLLEAGUE DAN LANNING, WHO, BY COINCIDENCE, IS ALSO A RESIDENT OF THE CITY OF MCKINNEY. SO HE

[00:25:03]

THE REASON IS THAT WATER IS A VERY STEADY BUSINESS. YOU KNOW, PEOPLE USE WATER IN PRETTY FIXED PATTERNS YEAR AFTER YEAR. EXPENSES ARE GENERALLY PRETTY EASY TO FORECAST ON AN ANNUAL BASIS. SO WHAT YOU SEE WITH SOME CITIES IS THAT YOU SEE THEM DO THE REVIEW ABOUT EVERY 2 TO 3 YEARS. MCKINNEY IS FAIRLY UNIQUE, HOWEVER, FOR A COUPLE OF REASONS. FIRST OF ALL, YOU'VE HAD A REMARKABLE AMOUNT OF GROWTH. THE GROWTH HAS IMPACTED THE WATER AND WASTEWATER RATE STRUCTURE VERY SIGNIFICANTLY TO ITS BENEFIT. I MIGHT I MIGHT ADD, SECONDLY, YOU'VE GOT YOUR MAJOR SUPPLIER OF WATER SERVICES, NORTH TEXAS MUNICIPAL WATER DISTRICT, AND THEIR RATES TEND TO VARY FAIRLY SIGNIFICANTLY EACH YEAR. SO FOR THOSE TWO REASONS, IT'S IMPORTANT TO REVIEW YOUR RATES EVERY YEAR SO THAT WHEN UNEXPECTED SAVINGS ARE EXPERIENCED, YOU CAN PASS THOSE SAVINGS THROUGH TO YOUR RATEPAYERS, WHILE AT THE SAME TIME, YOU HAVE TO RECOGNIZE THAT IN GENERAL, WATER RATES ARE GOING UP. YOU KNOW, COST OF EVERYTHING GOES UP BY 3% A YEAR. WATER IS A BUSINESS. YOU TRY TO RUN YOUR WATER OPERATION LIKE LIKE A BUSINESS. YOU PRODUCE A PRODUCT. WATER IS A PRODUCT. AND SO AS THE COST OF PRODUCING THAT PRODUCT GOES UP, YOU HAVE NO CHOICE BUT TO PASS IT THROUGH TO YOUR ULTIMATE RATEPAYERS. SO THE PROCESS WE EMPLOY HELPS YOU MAKE THESE DECISIONS ON AN ANNUAL BASIS. IT'S FAIRLY STANDARD EVERY YEAR. WE GENERALLY START IN THE MAY TIME FRAME. THE CITY STAFF PROVIDES US WITH THE DATA THAT IS NECESSARY TO FOR US TO UPDATE OUR COMPREHENSIVE RATE MODEL WE DEVELOP. YOU KNOW, WE WILLDAN HAS A RATE MODEL THAT IS USED FOR OVER 200 CITIES IN THE UNITED STATES AND FIVE SOVEREIGN NATIONS TO HELP SET WATER AND SEWER RATES. WE LONG AGO ADOPTED THIS RATE FOR THE CITY, THIS MODEL FOR THE CITY OF MCKINNEY, AND WE UPDATE IT EVERY YEAR. WE DID THAT UPDATE THIS YEAR. WE MET WITH STAFF ABOUT A MONTH AGO TO GO OVER OUR PRELIMINARY RECOMMENDATIONS AND THE ASSUMPTIONS BEHIND OUR RECOMMENDATIONS, AND AS A RESULT OF THAT, WE'RE GOING TO PRESENT THIS THIS PRESENTATION TO YOU TODAY FOR OUR RECOMMENDATIONS FOR YOUR RATES IN FISCAL YEAR 2026. I WANT TO START BY JUST TALKING A LITTLE BIT ABOUT WHAT HAS CHANGED IN THE LAST YEAR, AND WHAT ARE THE MAJOR FACTORS ARE THAT ARE IMPACTING THIS YEAR'S WATER AND SEWER RATE RECOMMENDATIONS? WELL, YOUR USAGE IS CONTINUING TO INCREASE. YOU'RE SEEING A FAIRLY STEADY INCREASE IN YOUR WATER USAGE AND IN YOUR CUSTOMER ACCOUNTS. NORTH TEXAS, AS THEY HAVE EVERY YEAR, IS RECOMMENDING AN INCREASE TO THEIR WATER AND THEIR WASTEWATER VOLUMETRIC RATE. THE GOOD NEWS IS THAT THE WATER RATE IS A LITTLE GOING TO BE A LITTLE BIT LESS THAN WHAT THEY PREVIOUSLY SAID IT WAS GOING TO BE. BAD NEWS IS, THE WASTEWATER RATES ARE GOING TO BE A LITTLE MORE THAN WHAT THEY PREVIOUSLY SAID THEY WERE GOING TO BE, SO IT'S BASICALLY GOING TO OFFSET, IN OTHER GOOD NEWS, THE AMOUNT OF DEBT THAT THE CITY IS ANTICIPATING ISSUING BEFORE THE WATER AND SEWER UTILITY HAS DECREASED A LITTLE BIT FROM LAST YEAR'S FORECAST. AND THE MAJOR REASON IS THE 380 BYPASS AND THE GRANT MONEY THAT YOU THAT CITY STAFF HAS MANAGED TO SECURE FOR THAT PROJECT. LOOK, WHEN YOU GET GRANT MONEY THAT BENEFITS EVERYBODY, IT BENEFITS NOT ONLY THE CITY IN GENERAL, BUT IT ALSO BENEFITS YOUR WATER AND WASTEWATER RATES. AND SO THE FACT THAT YOU'VE BEEN ABLE TO SECURE THAT MONEY MEANS THAT YOU HAVE TO ISSUE LESS DEBTS, AND SO YOUR WATER RATE INCREASES WON'T HAVE TO BE AS HIGH. BUT WHILE ALL OF THESE IMPACTS HAVE BEEN BENEFICIAL, IT DOES NOT FORESTALL THE NEED FOR WATER RATE INCREASES. INCREASES IN WATER COSTS ARE A FACT OF LIFE. IT'S A FACT OF LIFE FOR EVERY CITY IN THE STATE OF TEXAS AND EVERY CITY IN THE UNITED STATES. AND SO HOW CITIES MANAGE THESE COST INCREASES AND THESE INEVITABLE RATE INCREASES IS GOING TO BE CRITICAL IN WHETHER OR NOT YOU MANAGE TO NOT ONLY SUCCESSFULLY RUN YOUR WATER UTILITY, BUT ALSO IF YOU HAVE A FINANCIALLY HEALTHY UTILITY AS WELL. OKAY, FIRST QUESTION ALMOST EVERYBODY ASKS IN A PRESENTATION SUCH AS THIS IS WHAT DO WE PAY FOR WATER SERVICE? AND MORE IMPORTANTLY, IS WHAT CITIZENS IN THE CITY OF MCKINNEY PAY DISPROPORTIONATE TO WHAT OTHER PEOPLE HERE IN NORTH TEXAS PAY FOR WATER AND SEWER SERVICE? THIS CHART ATTEMPTS TO ADDRESS THIS QUESTION. THE AVERAGE RESIDENTIAL USER IN THE CITY OF MCKINNEY USES SOMEWHERE AROUND 8 TO 10,000 GALLONS OF WATER AND SEWER SERVICE A MONTH.

THAT'S AN AVERAGE. OBVIOUSLY, SOME PEOPLE USE MORE, SOME PEOPLE USE LESS. AND EVEN FOR A TYPICAL RESIDENTIAL CUSTOMER, SOMETIMES THEY'LL USE MORE IN THE SUMMER, A LITTLE BIT LESS IN IN THE WINTER. BUT 10,000 GALLONS OF WATER SERVICE AND 5000 GALLONS OF WASTEWATER

[00:30:03]

RIGHT NOW YOU HAVE APPROXIMATELY 77,000 WATER CUSTOMERS RIGHT NOW, TO NO GREAT SURPRISE, THE VAST MAJORITY OF THEM ARE RESIDENTIAL, BUT YOU HAVE AN EXTREMELY ROBUST COMMERCIAL.

CUSTOMER BASE AS WELL, AND YOU'VE GOT ABOUT 70,000 WASTEWATER CUSTOMERS. YOU'VE EXPERIENCED VERY SIGNIFICANT GROWTH IN THE LAST FEW YEARS. THIS GROWTH IS EXPECTED TO CONTINUE IN THE FUTURE. NOW, THE REASON WHY GROWTH IS GOOD FOR A WATER UTILITY IS THAT EVERY NEW WATER ACCOUNT MEANS A NEW MINIMUM CHARGE, A NEW VOLUMETRIC RATE. WATER IS A CLASSIC BULK COMMODITY. THE MORE YOU SELL, THE LESS YOU HAVE TO CHARGE TO EVERYBODY FOR THAT SERVICE. SO PROPERLY MANAGED GROWTH IS VERY BENEFICIAL FOR A WATER UTILITY. AND WHAT WE'RE WE'RE FORECASTING THAT THAT GROWTH IS GOING TO CONTINUE, THAT YOU'RE GOING TO CONTINUE TO ADD ABOUT 2500 NEW WATER AND WASTEWATER ACCOUNTS EVERY YEAR OVER THE NEXT DECADE. WHAT DOES THIS MEAN FOR THE UTILITY? WELL, RIGHT NOW THAT MEANS THAT YOUR 76,692 WATER ACCOUNTS ARE FORECAST TO HIT ALMOST 100,000 ACCOUNTS BY THE YEAR 2035. YOU CAN SEE FROM THIS CHART HERE THAT OVER THE LAST FIVE YEARS, GROWTH HAS BEEN VERY STEADY. WE'RE EXPECTING IT TO CONTINUE TO BE VERY STEADY. AND THAT MEANS THAT YOU'RE GOING TO HAVE A SIGNIFICANTLY LARGER UTILITY TEN YEARS FROM NOW THAN YOU HAVE RIGHT NOW. OKAY. ONE OF THE ISSUES THAT SORT OF PERCOLATED UP IN THIS MOST RECENT UPDATE, THAT HASN'T REALLY BEEN THAT MUCH OF A FACTOR IN PRIOR YEARS, IS THE ISSUE OF OUTSIDE CITY RATES. THIS IS AN ISSUE THAT HAS BECOME MORE PREVALENT BEFORE THE PUBLIC UTILITY COMMISSION OF TEXAS. THE CITY OF MCKINNEY, LIKE MOST CITIES IN THE STATE OF TEXAS, CHARGES A HIGHER RATE FOR OUTSIDE FOR CUSTOMERS WHO RESIDE OUTSIDE THE CITY LIMITS OF THE CITY. THIS IS A FAIR, JUST AND REASONABLE PROCESS. IT IS. IT HAS BEEN GENERALLY ACCEPTED AS PART OF RATE MAKING METHODOLOGY FOR THE LAST 50 YEARS. IT IS ALSO BASED ON THE GENERALLY HIGHER COST OF SERVING AN OUTSIDE CITY CUSTOMER. ONE OF THE THINGS NOW THIS CHART SHOWS RIGHT NOW THAT YOU'VE GOT SOME OUTSIDE CUSTOMERS, NOT A WHOLE LOT. THEY'RE ONLY ABOUT 4% OF YOUR VOLUME. BUT BUT THERE ARE A FEW. AND SO THE QUESTION HAS BEEN ASKED, IS IT FAIR, JUST AND REASONABLE TO CHARGE A HIGHER RATE? WELL, WE EXPANDED OUR ANALYSIS THIS YEAR TO DO AN ANALYSIS OF THE COST OF OUTSIDE CITY SERVICE. YOU CALCULATE THAT COST AND THIS IS NOT A RATE MAKING SEMINAR, BELIEVE ME. BUT YOU CALCULATE THAT COST BY EMPLOYING A METHODOLOGY CALLED THE UTILITY BASIS. AND WE EMPLOY THAT METHODOLOGY. AND OUR CONCLUSION IS THAT IT IS THAT IS ABSOLUTELY FAIR, JUST REASONABL, AND IN ACCORDANCE WITH COST PRINCIPLES TO CHARGE A 25% PREMIUM TO YOUR OUTSIDE CITY CUSTOMERS. IT IS IN ACCORDANCE WITH COSTS. THEY ARE NOT BEING CHARGED AN EXCESSIVE AMOUNT, THEY ARE BEING CHARGED A FAIR RATE. AND WE RECOMMEND THAT YOU CONTINUE TO UTILIZE THAT POLICY. ANOTHER QUICK BACKGROUND CHART. THIS IS YOUR FORECAST PURCHASES FROM NORTH TEXAS MUNICIPAL WATER DISTRICT. YOU HAVE A TAKE OR PAY AMOUNT EVERY YEAR THAT YOU HAVE TO CHARGE, THAT YOU HAVE TO PAY NORTH TEXAS, IN OTHER WORDS, A CERTAIN AMOUNT OF GALLONS THAT YOU HAVE TO BUY, WHETHER YOU USE THEM OR NOT. BUT AS WE FORECAST, YOU'RE EXPECTED TO HIT TO EXCEED YOUR TAKE OR PAY LEVEL EVERY YEAR FOR THE NEXT DECADE, WHICH IS WHAT YOU WOULD EXPECT FROM A GROWING UTILITY. YOU PURCHASED ABOUT 13.4 BILLION GALLONS OF WATER YOU'RE EXPECTED TO PURCHASE IN THE UPCOMING YEAR, AND THAT'S EXPECTED TO INCREASE TO ABOUT 17 BILLION GALLONS BY THE YEAR 2035. NOW, ONE OF THE BIGGEST SINGLE DRIVERS OF THE RATE PLAN THAT WE'RE PRESENTING

[00:35:06]

NOW, THE INCREASES WILL GET A LITTLE BIT LESS IN FUTURE YEARS. BUT CONSIDERING THE FACT THAT 60 TO 65% OF YOUR TOTAL WATER AND WASTEWATER COST OF SERVICE IS NOTHING MORE THAN A PASS THROUGH OF YOUR CHARGES TO NORTH TEXAS, WHEN THEY DO A RATE INCREASE, YOU HAVE TO PASS THOSE COSTS THROUGH TO YOUR CUSTOMERS. THERE IS NO SIMPLE. THERE IS NO EASY WAY AROUND THAT. THIS CHART RIGHT HERE SHOWS WHAT NORTH TEXAS'S FORECAST RATE IS GOING TO BE, AS OPPOSED TO WHAT THEY THOUGHT IT WOULD BE LAST YEAR. GOOD NEWS IS, IS THAT THE RATE THAT IS PROJECTED AT $4.19 FOR 2026 IS A LITTLE LESS THAN WHAT THEY TOLD YOU LAST YEAR. IT WAS GOING TO BE LAST YEAR, THEY THOUGHT IT WAS GOING TO BE $4.25. AND AS YOU CAN SEE, THEY DO A TEN. THEY DO A TEN YEAR FORECAST EVERY YEAR. AND THEIR LATEST WATER TEN YEAR FORECAST SHOWS THEIR RATE CLIMBING PRETTY SIGNIFICANTLY OVER THE NEXT DECADE, BUT A LITTLE BIT LESS SIGNIFICANTLY THAN WHAT THEY THOUGHT IT WOULD BE LAST YEAR. AND WE INCORPORATED THAT INTO OUR LATEST FORECAST. THAT'S THE GOOD NEWS. HERE'S THE NOT SO GOOD NEWS ON THE WASTEWATER SIDE. THEIR RATE INCREASES ARE SIGNIFICANTLY GREATER THAN WHAT THEY THOUGHT THAT THEY WOULD BE LAST YEAR. THIS YEAR, THEIR RATE IS GOING TO BE $3.33 PER 1000 GALLONS. THEY SAID LAST YEAR IT WOULD ONLY BE $3.06. SO YOU GOT A SLIGHTLY LOWER WATER RATE, BUT A SLIGHTLY HIGHER WASTEWATER RATE. BUT WHAT'S ALSO IS IMPORTANT IS THAT THESE INCREASES ARE GOING TO CONTINUE EACH YEAR IN THE NEXT, FOR THE NEXT DECADE. THAT'S WHY IT'S VERY IMPORTANT FOR THE CITY OF MCKINNEY TO ADDRESS ITS WATER RATES AND DO AN ADJUSTMENT EVERY SINGLE YEAR. THE OTHER MAJOR FACTOR BEHIND THE BEHIND THE WATER RATE PLAN IS THE DEBT YOU'RE GOING TO HAVE TO ISSUE. THIS SHOWS THAT OVER THE NEXT FOUR YEARS, THE CITY IS EXPECTED TO ISSUE $253 MILLION OF LONG TERM DEBT TO FUND WATER AND WASTEWATER SYSTEM IMPROVEMENTS. NOW, THIS IS A DIRECT INVESTMENT IN THE FUTURE OF THE CITY OF MCKINNEY. THE MONEY THAT IS THAT IS GENERATED THROUGH THIS DEBT IS GOING TO GO TO BUILD INFRASTRUCTURE THAT IS GOING TO SERVE NOT ONLY YOUR GENERATION, BUT FUTURE GENERATIONS OF MCKINNEY RESIDENTS AS WELL. AND SO, WHILE IT'S NEVER EASY TO ASK CUSTOMERS TO CONTRIBUTE MORE TO PAY THIS DEBT SERVICE, WHAT THEY'RE REALLY DOING IS INVESTING IN THE FUTURE OF THE CITY. AND THIS IS A QUARTER OF $1 MILLION OF INVESTMENT. AND THOSE AND THAT INVESTMENT AND THAT NEW DEBT IS BEING FACTORED INTO THE RATE PLAN ALSO. NOW, THIS IS ONE OF MY FAVORITE CHARTS IN THE PRESENTATION, BECAUSE I THINK THIS REALLY ILLUSTRATES THE CHALLENGES THAT YOU FACE IN RUNNING A WATER UTILITY HERE IN DENTON, COLLIN COUNTY CORRIDOR. THIS SHOWS THE TOTAL COST OF SERVICE FOR THE WATER UTILITY AND THE WASTEWATER UTILITY IN THE CURRENT. IN THE FISCAL YEAR 2026, YOUR FORECAST, YOUR WATER COST OF SERVICE IS FORECAST TO BE $96 MILLION AND THE WASTEWATER COST OF SERVICE $72.7 MILLION. 60% OF YOUR WATER COST OF SERVICE IS NOTHING MORE THAN A PASS THROUGH OF THE NORTH TEXAS MUNICIPAL WATER DISTRICT CHARGES, AND THEN ANOTHER 15% IS DEBT SERVICE. SO 75% OF YOUR WATER COST OF SERVICE IS FIXED. PASS THROUGH CHARGES THAT YOU'VE GOT BASICALLY NO CONTROL OVER. SAME THING IS TRUE WITH WASTEWATER. YOU SEE THAT BIG CHUNK OF THE PIE IS NORTH TEXAS MUNICIPAL WATER DISTRICT WASTEWATER CHARGES AS WELL. NOW, THE OTHER CITIES THAT I SHOWED YOU IN THE RATE COMPARISON EARLIER, THEY HAVE VERY SIMILAR CHARTS TO THIS. BUT WHAT IT TELLS YOU IS SOMETHING IS UNAVOIDABLE. AND THAT IS WHEN

[00:40:03]

SO ON THE NEXT COUPLE OF CHARTS, I'M GOING TO SHOW YOU THE ACTUAL RATES THEMSELVES. THEN I'LL SHOW YOU THE MORE IMPORTANT CHART. AND THAT IS THE IMPACT ON RATEPAYERS OF THESE ADJUSTMENTS.

WHAT WE'RE RECOMMENDING IS ABOUT A 4% INCREASE IN THE WATER RATE FOR THIS YEAR. THIS IS YOUR THIS CHART SHOWS YOU THE RESIDENTIAL AND THE COMMERCIAL INSIDE RATE BOTH THE BOTH THE BASE CHARGE AND THE VOLUMETRIC RATE PER 1000 GALLONS. IT SHOWS THE CURRENT RATE AND THE RECOMMENDED INCREASE THAT WOULD BE EFFECTIVE IN OCTOBER OF 2025. IT'S ABOUT A 4% INCREASE. WHAT'S ALSO IMPORTANT ABOUT THIS CHART IS THAT IT PROJECTS THE FUTURE RATES IN THE YEARS 2020. IN THE FISCAL YEARS 2027 THROUGH 2030. AND AS YOU CAN SEE, NEXT YEAR AND THE YEAR AFTER, WE'RE PROJECTING THE RATE ADJUSTMENT IS PROBABLY GOING TO BE A LITTLE BIT HIGHER. THE MAIN REASON IS THE DOUBLE DIGIT RATE INCREASES THAT NORTH TEXAS IS PROJECTING THAT THEY'RE GOING TO BE IMPLEMENTING IN 2027 AND 2028. SO WE'VE GOT A SLIGHTLY LOWER ADJUSTMENT THIS YEAR. BUT NEXT YEAR AND IN 2027, WE THINK THOSE INCREASES ARE GOING TO BE A LITTLE BIT HIGHER. THIS THIS NEXT CHART RIGHT HERE JUST SHOWS THE INCREASE FOR YOUR FOR YOUR OTHER CUSTOMER CLASSES INCLUDING IRRIGATION SAME PERCENTAGE ABOUT 4% WATER INCREASE. THE NEXT CHART HERE SHOWS YOUR WASTEWATER RATE ADJUSTMENT. YOU CAN SEE WE'RE PROJECTING ABOUT A 4.5% INCREASE IN THE WASTEWATER, VOLUMETRIC AND BASE CHARGE FOR ALL OF YOUR CUSTOMER CLASSES. AND THE VOLUMETRIC RATE ADJUSTMENTS WILL BE HIGHER IN EFFECTIVE OCTOBER 26TH AND 2027. SO WHAT DOES THIS MEAN IN TERMS OF WHAT PEOPLE PAY? WELL, THIS IS PROBABLY THE SINGLE MOST IMPORTANT CHART IN THE ENTIRE PRESENTATION BECAUSE IT SHOWS WHAT THE IMPACT OF THIS RATE PLAN WILL BE ON YOUR RATEPAYERS.

REMEMBER I SAID EARLIER THAT THE AVERAGE RESIDENTIAL CUSTOMER USES 8 TO 10,000 GALLONS OF WATER SERVICE A MONTH? IF YOU LOOK ON THIS CHART, YOU SEE THAT AVERAGE CUSTOMER PAYS $136.60 FOR THAT SERVICE. UNDER THIS PLAN, THEIR BILL WOULD GO UP BY ABOUT $6 A MONTH. IF YOU USE LESS THAN THAT 5000 GALLONS, YOUR BILL WOULD GO UP BY ABOUT $4.85 A MONTH. NOW, IF THE AVERAGE USAGE IS 10,000 GALLONS, WHAT THAT MEANS IS ABOUT 70 TO 75% OF MONTHLY RESIDENTIAL BILLS

[00:45:03]

OKAY. AND THEY THEY SALINA IS A VERY INTERESTING CASE. THEY ARE ISSUING SOMEWHERE IN THE NEIGHBORHOOD OF $400 MILLION OF DEBT. NOW, YOU WOULD THINK THAT WOULD CAUSE THEIR RATE TO EXPLODE, BUT THEIR GROWTH LEVELS HAVE BEEN ABSOLUTELY OFF THE CHARTS. AND SO THEY HAVE HAD SO MUCH GROWTH. THEY'VE BEEN VERY AGGRESSIVE WITH THEIR IMPACT FEES AS WELL IN, YOU KNOW, FUNDING, FUNDING SOME OF THAT CAPITAL INVESTMENT THROUGH IMPACT FEES. THEY HAVE BEEN ABLE TO AVOID A LOT OF THE VERY LARGE INCREASES. BUT THEY'RE STILL THEY'RE VERY CLOSE TO YOU AND THEY DO NOT BUY WATER FROM NORTH TEXAS. THEY THEY BUY WATER FROM UPPER TRINITY, I BELIEVE. IS THAT RIGHT? YEAH. YEAH, THEY BUY WATER FROM UPPER TRINITY. I, YOU KNOW, I DON'T KNOW AS MUCH ABOUT UPPER TRINITY'S COSTS AS I KNOW ABOUT NORTH TEXAS'S COSTS. AND BUT, YOU KNOW, I WOULD SAY THEY'RE THEY'RE IN THE SAME BALLPARK AS YOU. YOU'RE A LITTLE HIGHER THAN THEM RIGHT NOW. I WOULDN'T BE SURPRISED IF TWO YEARS FROM NOW, YOU KNOW, YOU'RE A LITTLE LOWER THAN THEM. I JUST WANT TO BE THE ANSWER TO THE QUESTION OF, LIKE, WHAT'S THE BENEFIT OF BEING IN THE WATER DISTRICT IF WE HAVE NON WATER DISTRICT PEOPLE PAYING LESS THAN US? SO. MR. DO YOU WANT TO TAKE A STAB AT THAT? WELL, WE'VE GOT PREDICTABLE WATER FOR THE NEAR FUTURE. IT COSTS MONEY TO BE ABLE TO GET IT. THE WATER DISTRICT JUST BUILT A RESERVOIR. THEY'VE PASSED THOSE COSTS ON TO US. TRADE OFF IS WE HAVE ROBUST WATER SUPPLIES FOR THE FUTURE. I CAN TELL YOU WITH SALINA AND I, YOU KNOW, THEY'RE STRUGGLING. THEY ARE THEY DON'T HAVE SOURCES OF WATER GOING FORWARD. THEY'RE THEY'RE CANVASING OTHER CITIES AND COMMUNITIES TO ASK FOR WATER TO BE ABLE TO GET IT. SO THERE'S A BIG DIFFERENCE. SO JUST BECAUSE THE RATES MAY BE A LITTLE LOWER, THEY'RE GOING TO HIT A CEILING. AND THAT'S NOT JUST SINGLING OUT SALINA. IT WAS THE REFERENCE I THINK YOU MADE.

BUT THERE ARE OTHERS TOO. ROYSE CITY YOU KNOW MOST OF THE OTHERS ARE WATER DISTRICT CUSTOMERS.

[00:50:02]

YEAH, IT'S VERY CLOSE THERE. LIKE I SAID, IT MATCHES. BUT IT'S YOU KNOW THE ONLINE WARRIORS OUT THERE, THE CHART POSTERS. YEAH. YOU JUST POST THE CHART AND WHAT THEY DON'T KNOW.

AND WHAT I WOULD REMIND THEM IS YOU PAY FOR CERTAINTY AND WE HAVE A CERTAIN CERTAINTY IN OUR WATER SUPPLY FOR THE NEAR FUTURE. NOW WE THE WATER DISTRICT WILL TELL YOU, THEY MAY SAY, WHAT, PAUL, DON'T, YOU KNOW, DON'T SPEAK SO QUICKLY BECAUSE THEY KNOW THEY'RE HAVING TO LOOK OUT 20, 30 YEARS. WE'RE NOT GOING TO BE CERTAIN 30 YEARS FROM NOW, WE'RE GOING TO HAVE TO FIND MORE SOURCES OF WATER. BUT WE'RE IN A GOOD PLACE RIGHT NOW. AND ONCE AGAIN, THIS IS, YOU KNOW, 10,000 GALLON, 5000 WASTEWATER DEPENDING ON APPLES AND ORANGES OF ALL OF THESE CITIES. WE ALL WE ALL STRUCTURE OUR RATES A LITTLE BIT DIFFERENTLY. SOME SOME MAY PAY MORE ON THE ON THE HIGHER USAGE END THAN WE DO. OR MAYBE THEY'RE SHIFTING SOME OF THE COST TO COMMERCIAL. IT JUST DEPENDS SOMETIMES A LITTLE BIT ON ON HOW THE RATES WERE MADE OVER TIME.

SO YEAH. AND PAUL'S COMMENT ABOUT WHERE THEY ARE IN THE CAPITAL PROGRAM IS ALSO ANOTHER LARGE DRIVER OF THESE RATES. SO WE'RE ALL FAIRLY CLOSE. BUT LIKE LIKE I SAID SOME SOME OF THEM ARE OUTLIERS. AND MAYBE THEY HAVE THEY HAVE A DIFFERENT STRUCTURE IN THE IN THE LOWER LOWER USAGE NUMBERS OR SOMETHING LIKE THAT. SO IT IT COULD JUST BE ANY OF THAT. YEAH. I'LL JUST GIVE YOU ONE EXAMPLE, PLANO FOR EXAMPLE. THEY HAVE VERY LOW RATE FOR THIS LEVEL OF USAGE BECAUSE IN THEIR FIRST 3000 GALLONS THEIR RATE IS SOMETHING LIKE $0.40 PER THOUSAND GALLONS. THEY MADE THE CONSCIENTIOUS DECISION THAT THEY THEY BELIEVE THEY HAVE A LARGE NUMBER OF FIXED INCOME PEOPLE AND, AND ELDERLY PEOPLE IN THEIR COMMUNITY. SO THEY WANTED A VERY LOW RATE FOR VERY LOW VOLUME USERS. HOWEVER, IN PLANO, ONCE YOU GET ABOVE ABOUT 10 TO 15,000 GALLONS, YOU'RE PAYING LIKE $11 PER THOUSAND GALLONS. YOU'RE PAYING A VERY, VERY HIGH RATE. SO WHAT THEY'VE DONE IS THEY'VE SHIFT THE COSTS FROM THEIR LOW VOLUME USERS TO THEIR HIGH VOLUME USERS. IT'S VERY HARD FOR CHARTS LIKE THIS TO CAPTURE THAT KIND OF INFORMATION. YOU DO NOT WANT TO BE A 30,000 GALLON A MONTH USER IN THE CITY OF PLANO BECAUSE THEY REALLY TAG YOU, WHEREAS MCKINNEY MCKINNEY ALSO HAS A INVERTED BLOCK RATE. IT'S JUST NOT AS AGGRESSIVE AS THAT.

THANKS FOR THE EXPLANATION. ANYBODY ELSE A QUESTION ON THAT SAME SLIDE? AND REALLY JUST SOMETHING THAT STANDS OUT. YOU LOOK AT FARMERSVILLE, THAT'S THE CITY CLOSEST TO THE PLANT. AND WHILE THEY CURRENTLY MAY NOT BE AS FAST GROWTH AS SOME OF THE OTHERS, THEIR RATE IS EXTRAORDINARILY HIGHER. SO WHAT'S GOING ON WITH THAT FARMERSVILLE NUMBER? HOW DO WE AVOID THAT? I, I'M NOT SURE. I, WE DON'T WORK FOR FARMERSVILLE, BUT BASED ON THIS CHART WE SHOULD BE. I LOVE IT I LOVE IT, I, I'M NOT REALLY SURE. I DON'T KNOW MUCH ABOUT WHAT'S GOING ON.

THEY'VE ALWAYS BEEN REALLY HIGH. MY MARK. DO YOU HAVE ANY PERSPECTIVE OR ANY THOUGHTS ON THAT? I HAVE, I HAVE NOT LOOKED AT THE FARMERSVILLE NUMBER, BUT YOU KNOW, THE NUMBER IS NOT VERY MUCH BELOW THAT. AND I KNOW FORNEY IS A FAST GROWING GROWTH COMMUNITY, BUT THEY'RE ALSO IN INSIDE THE NORTH TEXAS UMBRELLA. SO REALLY HAVEN'T LOOKED AT THOSE RATE STRUCTURES. WE'VE MOSTLY TRIED TO CONTINUE TO LOOK AT AT PLANO AND FRISCO AND ALLEN'S RATE. MY ONLY GUESS IS THERE'S SOME ECONOMIES OF SCALE. FARMERSVILLE ARE SMALLER COMMUNITY. AND THEY GOT TO SPREAD THOSE COSTS OVER A SMALLER GROUP OF FOLKS. WYLIE IS THE HOME OF THE NORTH TEXAS MUNICIPAL WATER DISTRICT. THAT'S WHERE THE THEY GET THE WATER OUT OF THE LAKE AND, YOU KNOW, THEY'RE HIGHER THAN THE AVERAGE AS WELL. SO THERE'S ALL KINDS OF DYNAMICS THAT GO INTO IT. AGAIN, YOU KNOW, YOU'RE ONE TAKE POINT OR LARGE CAPITAL PROJECT, NEW WATER LINE REPLACEMENT PROJECTS, PUMP STATION REBUILDS. YOU'RE ONE OF THOSE AWAY FROM HAVING TO SEE YOUR RATES GO UP SIGNIFICANTLY. RIGHT. SO WE JUST THEY'RE ALL A LITTLE BIT DIFFERENT. YOU HAVE TO EVALUATE IT ACCORDINGLY. ONE OTHER THING. NORTH TEXAS DOES NOT CHARGE A DIFFERENT RATE TO CUSTOMERS THAT ARE CLOSER TO THE PLANT THAN CUSTOMERS THAT ARE FURTHER AWAY. AND I THINK THAT'S VERY GOOD POLICY, BECAUSE IF YOU START TRYING TO DIFFERENTIATE THE RATE BASED ON HOW FAR YOU ARE FROM THE PLANT, YOU'RE GOING TO SET ALL THE CITIES AGAINST EACH OTHER. THE CITIES ARE GOING TO START ARGUING ABOUT WHAT ASSETS ARE USED AND USEFUL. I DIDN'T YOU KNOW, WE DON'T USE THAT LIFT STATION, SO WE SHOULDN'T HAVE TO PAY FOR IT. IT WOULD. IT'S A RECIPE FOR CHAOS IN NORTH TEXAS.

TO THEIR CREDIT, LONG TIME AGO SAID, HEY, LOOK, IF YOU'RE GOING TO BUY WATER FROM US, YOU'RE

[00:55:03]

THERE'S A COST TO THAT. THEY PROBABLY UNDERINVESTED IN SOME CAPITAL. AND I THINK NOW THEY'RE CATCHING UP AND HAVING TO MAKE SOME OF THOSE CAPITAL INVESTMENTS, IN ADDITION TO THE FACT THAT THE REGION'S GROWING SO FAST. IT'S A GOOD PROBLEM TO HAVE. BUT ONE OF THE CHALLENGES I HAD MENTIONED IN MY COMMENTS, KEEPING UP WITH INFRASTRUCTURE, IT'S NOT ONLY A PROBLEM OR A CHALLENGE FOR US AS A CITY, BUT AS A REGION IN THE WATER DISTRICT IS RIGHT THERE AT THE FULCRUM OF HAVING TO DEAL WITH MANAGING GROWTH. THEY'VE GOT TO FIND WATER, AND THEY'RE GOING TO BE SPENDING MONEY ON CAPITAL INTENSIVE PROJECTS. AND IT'S EXTREMELY EXPENSIVE TO BUILD WATER INFRASTRUCTURE. THANK YOU. ANYONE ELSE? MICHAEL? THANK YOU. THANK YOU VERY MUCH. SOME OF YOUR REPORT IS POSITIVE. THANK YOU. YEAH. WHY DON'T WE TAKE A QUICK BREAK, MAYBE COME BACK AT 945, 950? DOES THAT WORK? EVERYBODY GOOD? YEAH. WE'LL YEAH. OKAY. 951. LET'S RESUME OUR WORK SESSION. WHO'S UP? ME AGAIN? BUT NOT FOR VERY LONG. THEN I'M GOING TO HAND IT OFF TO MR. MINYARD. AND JUST. JUST A SECOND. WE'VE WE'VE KIND OF GONE THROUGH OUR PROCESS AND THEN WE'VE TALKED ABOUT WATER RATES. ONCE AGAIN, THANK YOU TO DAN AND DAN FROM WILLDAN. APPRECIATE THEIR TIME THIS MORNING. WE LET THEM GET ON THAT, GET ON OUT OF HERE. BUT WITH THAT I'M GOING TO GIVE JUST A QUICK OVERVIEW OF THE FISCAL YEAR 2020 BUDGET. THEN MR. MAYOR IS GOING TO TALK ABOUT OUR TAXABLE VALUES TAX RATES. AND THEN WE WILL MOVE ON TO GENERAL FUND REVENUES AND

[01:00:03]

THAT INCLUDES GENERAL FUND, WHICH WOULD BE STREETS AND THEN ON THE WATER AND WASTEWATER SIDE, A NEW INITIATIVE WILL BE WITH. THE WHAT IS CALLED INFLOW AND INFILTRATION I AND II. SO WE'LL BE LOOKING AT THAT ON THE WATER AND WASTEWATER SIDE. WE ALSO WILL DURING THE CIP PORTION, WE'LL TALK A LITTLE BIT ABOUT THE SIZE OF OUR CIP AND WHAT'S WHAT WE'VE GOT COMING OVER THE NEXT FIVE YEARS. I WOULD LIKE TO JUST POINT OUT WHERE WE ARE ON OUR PREVIOUS TWO BOND PACKAGES. AS YOU CAN SEE, THE 2019 BOND PACKAGE OF $350 MILLION IS ALMOST COMPLETELY EXPENDED AT THIS POINT, WITH JUST A FEW PUBLIC SAFETY DOLLARS AND A FEW PUBLIC WORKS FACILITIES DOLLARS STILL IN IN IN LIMBO. I DO ANTICIPATE THOSE PUBLIC SAFETY FACILITY DOLLARS BEING EXPENDED THIS FISCAL YEAR WITH THE POSSIBILITY OF THE PUBLIC WORKS FACILITY DOLLARS ENDING THE 2019 PACKAGE ON THE 2024 BOND PACKAGE, IT'S $450 MILLION. WE'VE MADE SIGNIFICANT PROGRESS, YOU KNOW, STARTING TO EXPEND THOSE DOLLARS. I DO ANTICIPATE A SALE DURING FISCAL YEAR 2026 THAT WILL LOWER THOSE NUMBERS, ESPECIALLY ON THE STREET IMPROVEMENT SIDE. AND FOR SOME PUBLIC SAFETY FACILITIES. WE'LL TALK A LITTLE BIT ABOUT THAT LATER. WITH THAT, I WILL

[01:05:04]

THANKS. THANK YOU, MR. HOLLOWAY. MR. MAYOR, COUNCIL MEMBERS, WE'RE GOING TO SPEND ABOUT 8 TO 10 SLIDES TALKING ABOUT THE VALUES THROUGHOUT THE CITY. AND THE PROPOSED PROPERTY TAX RATE WILL TOUCH A LITTLE BIT ON OUR SISTER CITIES VALUES. AND WE'LL ALSO KIND OF GIVE SOME CONTEXTUAL DATA AROUND THE TAX RATE AS IT RELATES TO INFLATION. YOU HEARD MR. GRIMES OPENING REMARKS, MENTIONING A FEW DIFFERENT OF THOSE VARIABLES THAT WE LOOK AT AS WE CONSIDER WHAT THE PROPOSED RATE IS EACH YEAR. SO WE'LL DIG INTO THAT A LITTLE MORE. FIRST THINGS FIRST, AS YOU'VE SEEN THROUGHOUT THE PRESENTATION, THE PROPOSED TAX RATE IS 41 TO 3. AND THAT'S BALANCED ON TOP OF AN ASSESSED VALUATION TOTAL FOR THE CITY AT LARGE OF RIGHT AT $43.5 BILLION ON THE SCREEN. HERE WE SHOW THE PROGRESSION OVER THE PREVIOUS TEN YEARS OF THE ASSESSED VALUE IN THE CITY. BACK IN FISCAL YEAR 17 AT 17 BILLION, WE'VE GONE UP FAIRLY CONSIDERABLY DUE TO VALUATION GROWTH, BUT ALSO NEW DEVELOPMENT ON THE GROUND YEAR OVER YEAR, AS WE'LL SEE IN THE NEXT COUPLE SLIDES. AND THEN THE GREEN BAR SHOWS YOU AN INVERTED RELATIONSHIP WHERE THE TAX RATE IS COMING DOWN. SO WE TALK A LOT ABOUT THE TAX RATE. AND THE TAX RATE IS A FUNCTION OF THE VALUE.

SO THAT OUR LEVY OR WHAT WE COLLECT IS ACTUALLY THE AMOUNT EACH YEAR THAT ALLOWS US TO OPERATE AS A CITY. THIS SLIDE IS A COMPARISON OF OUR VARIOUS APPRAISAL RATES AND THE TYPES OF APPRAISALS THAT ARE ON THE GROUND IN MCKINNEY COMPARED TO THE OTHER LARGER CITIES IN COLLIN COUNTY AND COLLIN COUNTY ITSELF. YOU'LL SEE THAT RESIDENTIAL IS THE BULK OF WHERE WE SEE OUR ASSESSED VALUE IN MCKINNEY, AND THAT'S CONSISTENT ACROSS COLLIN COUNTY AT LARGE.

MCKINNEY, FRISCO, TO SOME EXTENT, ALLEN TO A GREATER EXTENT ARE SIMILAR IN WHAT OUR RESIDENTIAL VERSUS COMMERCIAL MAKEUP IS. AND THEN THIS IS A SLIDE WE'LL SPEND A PRETTY GOOD AMOUNT OF TIME ON IN RELATION TO WHAT THE PERCENTAGE GROWTH AND CHANGES FOR EACH ONE OF THOSE SEGMENTS AS IT RELATES TO MCKINNEY. SO AGAIN, WE MENTIONED THAT WE HAVE 43.5 OR SO BILLION DOLLARS OF APPRAISED VALUE ON THE GROUND FOR FISCAL YEAR 26. AND THE MAKEUP OF THOSE ARE SPLIT BETWEEN SINGLE FAMILY, MULTIFAMILY, COMMERCIAL AND LOT AND LAND. AS YOU CAN SEE, SINGLE FAMILY AT 66.4 HAS STARTED TO TREND DOWN OVER THE PAST FIVE YEARS AS COMMERCIAL VALUES HAVE STARTED TO TREND UP. AND THAT'S REALLY WHAT WE'RE GOING FOR. AND A FEW BUDGET YEARS BACK, WE HAD TALKED ABOUT A 7030 SPLIT, AND THAT'S THE PROGRESSION THAT WE'RE TRYING TO GET TO OVER A PERIOD OF TIME. YOU WILL SEE THAT MULTIFAMILY CONTINUES TO MAINTAIN RIGHT AT THAT 8 TO 9% MARK OF OUR TOTAL ASSESSED VALUE. AND THEN FINALLY, AS WE CONTINUE TO DEVELOP AND AS DEVELOPMENT HAPPENS AND LOTS ARE BUILT OUT, THE VACANT LAND STARTS TO DECREASE. IT DOESN'T MEAN THE VALUE OF VACANT LAND IS DECREASING. IT JUST MEANS THAT IN AGGREGATE, AS A SHARE OF THE TOTAL VALUE OF THE CITY, LAND IS A SMALLER PIECE OF THE PIE. A COUPLE YEARS AGO WE BROKE THESE INDIVIDUALLY INTO PERCENT GROWTH OR PERCENT OF CHANGE CHARTS, SO THAT YOU ALL COULD HAVE SOME CONTEXT AROUND WHAT EACH MAKEUP OF OUR APPRAISED VALUE IS DOING INDIVIDUALLY, SEPARATE AND APART FROM THE OTHER SEGMENTS OF THE APPRAISED VALUE. SO ON THE SCREEN WE HAVE SINGLE FAMILY RESIDENTIAL VALUES, AND THE PERCENTAGE THAT YOU SEE ON EACH BAR IS THE PERCENTAGE GROWTH IN VALUE FROM THE PREVIOUS YEAR. I DRAW YOUR ATTENTION TO FISCAL YEAR 23 AND FISCAL YEAR 23. THE APPRAISAL DISTRICT MADE A PRETTY CONSIDERABLE CHANGE IN HOW THEY ASSESSED PROPERTIES AT LARGE, AND PARTICULARLY HAD KIND OF A CATCH UP YEAR. WE CALL IT A CLUTCH POP OR WHAT HAVE YOU.

WHEN THEY CAUGHT UP WITH WHAT THE SALES PRICES WERE DOING PRE AND POST PANDEMIC AND REALLY GOT ON TO THE BOOKS OF THE APPRAISAL ROLLS OF WHAT SINGLE FAMILY HOMES WERE SELLING FOR. AND THEN THE GROWTH DID NOT STOP. WHETHER IT WAS A NEW DEVELOPMENT OF HOMES OR WHETHER IT WAS IN MARKET VALUE OF HOMES GOING UP. AS WE'VE SEEN, YOU HAD A DOUBLE DIGIT INCREASE AGAIN IN FISCAL YEAR 24, AND THEN WE'VE SEEN OUR TRADITIONAL 4 TO 5% INCREASES OVER THE PAST COUPLE OF YEARS. I

[01:10:01]

YOU'LL SEE HERE WE HAVE SOME HISTORY AND SOME CONTEXTUAL MARKET HISTORY COMPARED TO WHAT WE'VE TRIED TO ACCOMPLISH AND RECOMMEND RECOMMENDING A BUDGET EVERY YEAR IN RELATION TO THOSE RATES THAT WE ADOPTED YEAR OVER YEAR, WE USE A DALLAS FORT WORTH ARLINGTON CPI INDEX FROM THE BUREAU OF LABOR STATISTICS TO KIND OF MARK TO MARKET WHERE WE ARE FROM, WHAT INFLATION IS DOING REGIONALLY. AND ALBEIT WE ARE NOT INSULAR IN TEXAS, WE HAVE TO CONSIDER THE NATIONAL INFLATION RATE, WHICH IS RIGHT AT 2.71. BUT OVER THE COURSE OF THE LAST FIVE YEARS, THE AVERAGE CPI IN OUR REGION HAS BEEN 4.75%. AND OVER THE LAST FIVE YEARS, THE MCKINNEY CITY COUNCIL HAS ADOPTED A RATE THAT'S RIGHT AT 2% ABOVE NO NEW REVENUE. SO WE'VE BEEN MINDFUL TO NOT ONLY RECOMMEND BUDGETS FROM THE CITY MANAGER'S OFFICE SIDE, BUT THE COUNCIL HAS BEEN MINDFUL TO ADOPT BUDGETS THAT HAVE TAX RATES THAT ARE BELOW THE REGIONAL INFLATION RATE. THIS IS JUST A DIFFERENT WAY TO REPRESENT THAT TEXT THAT WE SAW ON THE PREVIOUS SLIDE. YOU CAN SEE FOR THE FIRST TIME THIS THIS BUDGET YEAR RECOMMENDED RATE. THAT'S A SLIGHT UPTICK ABOVE THE REGIONAL INFLATION RATE, ALBEIT OVER THE LAST FIVE YEARS WE'VE BEEN WELL BELOW THAT RATE. AND THEN FINALLY, WE'RE GOING TO TALK A LITTLE BIT MORE ABOUT CIP IN THE COMING SLIDES. AND MR. HOLLOWAY MENTIONED THE MAKEUP OF OUR 2019 BOND AUTHORIZATION AND OUR 24 BOND AUTHORIZATION. BUT

[01:15:06]

I'M HAPPY TO TAKE ANY QUESTIONS OR PUNT ANY HARDER QUESTIONS. MR. GRIMES, IF YOU HAVE ANY QUESTIONS ABOUT THE VALUATIONS OR THE TAX RATES, AND THEN WE'LL GET INTO THE ESTIMATES OF THE GENERAL FUND REVENUES. AND THEN ALSO THE PROPOSED NEW EXPENDITURES OF THE GENERAL FUND. AS WE CONTINUE, THE ONLY THING I WANT TO ADD IS ON THE SLIDES THAT ARE PRESENTED ABOUT OUR RELATIVE EFFICIENCY OR PRODUCTIVITY. ANOTHER WAY TO LOOK AT IT, PER PER RESIDENT OR PER 1000 RESIDENTS OR HOWEVER WE WANT TO MEASURE IT. WE COULD SAY NUMBER OF CITIZENS SERVED PER EMPLOYEE, SAME MEASURE. EFFECTIVELY, WE ARE RELATIVELY MORE EFFICIENT THAN OUR NEIGHBORING COMMUNITIES. THAT'S NOT TO DISPARAGE THEM OR ANYTHING. IT'S NOT A COMMENTARY UPON THAT. THAT'S A POLITICAL DECISION, A POLICY DECISION THEY HAVE TO MAKE. BUT IN MCKINNEY, WE'VE LONG HAD A, A AN APPROACH EVEN PREDATES ME. ARRIVING HERE IS WE TRY TO GET AS MUCH DONE AS

[01:20:01]

BUT ONE OF THE THINGS THAT THAT THAT THAT I'M AND I'M SURE YOU'VE GONE THROUGH THIS REVIEW IS, IS TO CHALLENGE THE STAFF TO LOOK AT THE ADDITIONAL FTE. AND I'M, I'M COMING FROM A PRIVATE SECTOR PERSPECTIVE. YOUR TAXPAYERS ARE NOW AND I KNOW THERE'S A NUANCE BETWEEN PUBLIC AND PRIVATE SECTOR SPENDING. I GET THAT. BUT IF YOU LOOK AT WHAT'S HAPPENING IN THE PRIVATE SECTOR NOW AND YOU LOOK AT THE ECONOMY, EFFICIENCIES ARE BEING PUSHED ALL ACROSS THE PRIVATE SECTOR AND IT'S GOING TO BE FAR EASIER. I'M NOT SAYING ANYTHING YOU DON'T KNOW. IT'S GOING TO BE FAR EASIER TO EFFECTIVELY, EFFICIENTLY WITH A GREAT DEAL OF SCRUTINY, MANAGE THE ADDITIONAL FTES THAN TRYING TO MANAGE IT AT THE TAIL END. ONCE YOU'VE ADDED THOSE FTES, AND WE ALL KNOW PERSONNEL EXPENSE IS GOING TO BE ONE OF YOUR BIGGEST LINE ITEMS. AND SO ALL I'M ASKING IS, IS TO MAKE SURE THAT'S, YOU KNOW, THAT'S 49 AND NON PUBLIC SAFETY FTES ADDED TO THE CITY JUST TO HELP ME UNDERSTAND. AND WE CAN DO IT OFFLINE. JUST HOW CRITICAL THOSE POSITIONS ARE. AND GRANTED EVEN IF THE COUNCIL APPROVES THEM DOESN'T MEAN YOU'RE GOING TO FILL THEM I GET THAT. BUT THAT'S JUST ONE OF THE THINGS THAT I REALLY WANT TO GET A LITTLE BIT MORE FLAVOR ON THE FTES BECAUSE AS I SAID EARLIER, IT'S JUST IT'S EASIER TO ADD. AND I'VE LEARNED OVER TIME, MORE DISCIPLINE IN THE FRONT END IS JUST GOING TO MAKE A BETTER ENVIRONMENT AND EASIER TO MANAGE. SO OFFLINE, I'M JUST INTERESTED IN THOSE FTES BECAUSE THAT AGAIN, THAT'S NOT WHERE THE PRIVATE SECTOR AND THE PEOPLE THAT ARE PAYING THE TAXES ARE GOING. THEY'RE THEY'RE LOOKING AT EFFICIENCIES. AND I'M GLAD WE COMPARE WELL TO OTHER PUBLIC SETTINGS. BUT MAYBE WE NEED TO COMPARE MORE TOWARDS PUBLIC AND PRIVATE SETTINGS AND GAIN MORE EFFICIENCIES. SO I HAVE A QUESTION ON THIS. I WOULD I THINK THAT'S A GREAT QUESTION. THAT'S A IT'S VERY IMPORTANT THAT YOU BRING THAT UP. AND I THINK THE PUBLIC HAS TO BE AWARE OF THIS AS WELL. ANY CORPORATION THAT GROWS LIKE WE'RE GROWING, I MEAN, WE ARE A COMMUNITY THAT'S GROWING. IF YOU'RE IF YOU'RE PRYSMIAN OR ENCORE WIRE, FORMERLY KNOWN AS ENCORE WIRE, NOW PRYSMIAN, RAYTHEON OR ANY OF THE OTHERS, WHEN YOU'RE GROWING AT A RATE THAT WE'RE GROWING, YOU'RE GOING TO HAVE TO ADD PEOPLE. YOU JUST GOT TO HAVE TO HAVE TALENT TO BE ABLE TO DELIVER THE SERVICES. AND THAT'S WHERE WE ARE. WE SCRUTINIZE EVERY POSITION THAT COMES. YOU CAN ASK STAFF, WE GO THROUGH AND WE SCRUB ALL OF THEM. WE HAD $25 MILLION IN REQUESTS. WE HAD ABOUT 5 OR 6 MILLION IN SUPPLEMENTAL REVENUES TO BE ABLE TO ATTRIBUTE OR PROVIDE. AND SO WE HAD TO SAY NO TO A FAR MORE POSITIONS THAT WERE REQUESTED. WE LOOK AT THEM AND WE LOOK AT DO WE NEED THIS POSITION? AND WE ALWAYS SAY THE POSITION IS WHILE WE NEED PEOPLE TO MAKE THINGS HAPPEN, WE ALSO TRY TO FOCUS ON TECHNOLOGY AND EQUIPMENT AND TOOLS TO BE MORE PRODUCTIVE, BECAUSE IT'S A LOT HARDER TO HAVE TO IF THINGS TURN DOWN, IT'S A LOT HARDER TO HAVE TO RELEASE PEOPLE. IF YOU WANT TO SAY THAT, REMEMBER THOUGH, SOME OF THESE POSITIONS ARE DIFFERENT FUNDS. SO WE HAVE THE WATER FUND THAT ARE FUNDED OUT OF THE WATER RATES, AND WE HAVE THE AIRPORT FUND AND THEN OUR SURFACE WATER.

[01:25:05]

TYPICALLY YOUR GROWTH IN STAFFING DOES NOT TRACK LINEARLY WITH YOUR POPULATION GROWTH.

THERE'S IT'S WHAT WE CALL SUBLINEAR GROWTH. IT'S GROWTH THAT TYPICALLY OCCURS AROUND, YOU KNOW, MAYBE 75% OR 80% OF GROWTH IN STAFFING RELATIVE TO YOUR GROWTH IN POPULATION. THAT MEANS YOU YOU HAVE SOME ECONOMIES OF SCALE, AND YOU HAVE PRODUCTIVITY TOOLS SO THAT YOU DON'T HAVE TO STAFF UP LINEARLY. SOME COMMUNITIES, I WOULD SAY, DO FEEL LIKE THEY HAVE TO STAFF LINEARLY. I DON'T THINK THAT'S A GOOD WAY TO DO IT. I THINK YOUR TAXPAYERS ARE GOING TO DEMAND MORE FROM THAT. SO THE UPSHOT OF MY RESPONSE TO YOUR QUESTION IS, I THINK WE TAKE A VERY PRIVATE SECTOR APPROACH. I THINK OUR FOLKS AND I THINK PRIVATE SECTOR FIRMS, AS THEY GROW, DON'T GROW LINEARLY EITHER. THEY HAVE TO LOOK AT MORE PRODUCTIVITY AS WELL. BUT ANY PRIVATE SECTOR FIRM THAT'S GROWING AT OUR RATE WOULD ALSO BE STAFFING UP. RIGHT. AND I APPRECIATE THAT.

I'M GLAD TO HEAR THAT. YOU LOOK AT STAFFING INCREASE, THAT IT'S NOT AN INCREMENTAL IT'S JUST NOT A LINEAR GROWTH, BECAUSE YOU SHOULD GAIN INEFFICIENCIES IN ECONOMIES OF SCALE, AND IT'S NOT A 1 TO 1. SO I'M GLAD TO HEAR THAT. BUT AGAIN, JUST WANTED TO FOCUS AND HEAR MORE CLARITY ON FTE APPROVAL AND SCRUTINY. BECAUSE PAYROLL IS A BIG LINE ITEM. I APPRECIATE THE QUESTION.

AND THOSE ARE QUESTIONS THE TAXPAYERS ARE GOING TO HAVE. SO THANK YOU FOR ASKING. THANK YOU SIR, AND I'LL WAIT MY OTHER QUESTION TILL WE GET INTO EXPENDITURES. WELL, PAUL, I'M GOING TO GIVE YOU AN OPPORTUNITY BECAUSE ONE OF THE PARTS OF THE BUDGET THAT I ALWAYS FIND INTERESTING IS THE SUPPLEMENTAL REQUESTS THAT ARE THAT ARE AT THE END OF THIS BUDGET, THAT SHOW WHAT HAS BEEN ASKED FOR. AND I ALWAYS READ LIKE WHAT YOU ULTIMATELY DECIDED AGAINST. AND THERE ARE, YOU KNOW, DOZENS IF NOT A HUNDRED POSITIONS IN HERE THAT Y'ALL DIDN'T ADD THIS YEAR.

SO I DO I WILL SAY, HAVING READ THIS EVERY YEAR FOR THE LAST FOUR YEARS, IT DOES SEEM LIKE Y'ALL SCRUTINIZE THIS IN A WAY THAT IS MINDFUL OF. OF BEING EFFICIENT AND OF BEING PROTECTIVE OF THE TAXPAYER MONEY. AND WHEN YOU LOOK AT WHAT PERCENTAGE IS FUNDED OUT OF WHAT AREAS, THE ONES THAT HAVE DEDICATED INCOMES ARE OBVIOUSLY THE ONES THAT MAY HAVE MORE ADVANTAGE IN DEMANDING THOSE, THOSE EXTRA POSITIONS. BUT ANYWAY, I JUST WANTED TO MAKE THAT COMMENT AND APPRECIATE YOU. A COUPLE OF COMMENTS HERE. MR. LYNCH, THANK YOU FOR YOUR COMMENTS. MUCH APPRECIATED. YOUR BACKGROUND WILL WILL NO DOUBT BE AN ASSET IN THIS PROCESS AND WE APPRECIATE YOU WEIGHING IN. TREVOR, I HAVE SOME QUESTIONS FOR YOU. YOUR SLIDE 16. AND THESE ARE RELATED TO VALUES. MY QUESTION IS THE PROPERTY VALUES ARE IS THE ETJ INCLUDED IN THOSE VALUES. IT IS HOW DID YOU HOW DID YOU COME UP WITH THESE NUMBERS. GIVEN WHAT WE CAN AND CAN'T DO IN THE ETJ ANYMORE? YEAH. SO EACH YEAR THE COLLIN COUNTY APPRAISAL DISTRICT PROPOSES AND THEN SENDS US OUT A STATEMENT OF CERTIFIED VALUES, AND THOSE VALUES ARE SPECIFIC TO CITY OF MCKINNEY UNINCORPORATED AREAS. OKAY. AND THEN THEY'RE BROKEN DOWN INTO THE SEGMENTS THAT YOU SEE LISTED ON EACH SLIDE. THAT'S THE REASON WE KNOW WITH CERTAINTY WHAT PLANO'S IS, WHAT ALLEN'S IS, WHAT FRISCO'S IS, AND THEN WHAT COLLIN COUNTY AT LARGE IS. SO, FOR EXAMPLE, COLLIN COUNTY AT LARGE, WE WOULD KNOW THAT THAT INCLUDES THE ENTIRETY OF COLLIN COUNTY. BUT FOR OUR COMPARISONS THAT YOU SEE WITH OUR OTHER LARGER SISTER CITIES AND THEN FOR OUR INDIVIDUAL APPRAISAL TYPES, THAT THAT IS THAT 4 TO 5 SLIDE CLIP THERE IN THE MIDDLE, THOSE ARE PROVIDED TO US FROM THE COLLIN COUNTY APPRAISAL DISTRICT. AND THEN INTERNALLY, OUR BUDGET STAFF KEEPS VARIOUS METRICS TO SEE HOW WE'VE GROWN. OR I SHOULD SAY, WHAT THE PERCENT CHANGE IS ON AN ANNUAL BASIS, SO THAT WE CAN KIND OF SEE THOSE TRENDS THAT GIVE US SOME INSIGHTS INTO RECOMMENDATIONS AND PROPOSALS AND JUST GENERAL INFORMATION. WE PROVIDE THE COUNCIL AND THE PUBLIC. OKAY. PERFECT. OUR LAST QUESTION. YOUR LAST TWO SLIDES 26 AND 27. COULD YOU GO OVER THOSE AGAIN. AND THESE RELATE TO NUMBER OF EMPLOYEES SERVING X NUMBER OF CITIZENS. YEAH. YOU

[01:30:02]

SO EVERY CITY EMPLOYEE SERVES 7.3 CITIZENS. THAT'S THE OTHER WAY. IT'S EMPLOYEES PER 1000 IS THE TITLE THAT SHOULD BE ON THE SLIDE THAT'S ON THE SCREEN RIGHT NOW. AND THEN THIS IS A PER CAPITA SLIDE. SO 138 IN THE PROPOSED BUDGET. EVERY EMPLOYEE SERVES 138 CITIZENS. OKAY.

BETTER. YES. YEAH. BETTER. THANK YOU. GREAT. THANK YOU. THEN I'LL HAND IT OVER TO MR. HOLLOWAY ON GENERAL FUND REVENUES. WELL, WE'LL SPEAK, YOU KNOW, AT A HIGH LEVEL ABOUT OUR OUR REVENUE ESTIMATES FOR, FOR FISCAL YEAR 26, HOW WE ACTUALLY GOT TO OUR, OUR OVERALL NUMBER AS YOU AS YOU KNOW, SALES TAX, PROPERTY TAX MAKE UP THE BULK OF GENERAL FUND REVENUES. I'LL PROBABLY FOCUS A LITTLE BIT MORE ON THOSE. WE'LL SHOW YOU SOME OVERALL SLIDES OF WHAT THOSE LOOK LIKE. WE'RE HOPEFULLY HAVING A VERY CONSERVATIVE ESTIMATE ON ON SALES TAX FOR FISCAL YEAR 26.

WE'RE GOING TO TAKE THE FISCAL YEAR 25 NUMBER AND PROJECT 3.5% OVER TIME, TAKING OUT SOME OF THE HIGHS AND LOWS. WE'VE WE'VE GENERALLY GROWN AT ABOUT 4% THIS YEAR. WE'RE GROWING AT JUST

[01:35:06]

AND THEN PROPERTY VALUES GROWING IN THE NEXT. INTEREST INCOME. WE HAVE BUDGETED ABOUT 7% OVER FISCAL YEAR 25. THAT'S SOME GOOD NEWS. YOU KNOW, FOR MANY, MANY YEARS, ESPECIALLY WITH THE WITH THE WAY WE'RE ALLOWED TO INVEST MONEY, WE WERE ALMOST GAINING NO INTEREST IN BUT WITH WITH BALANCES AND. YOU KNOW, INCREASED INCOME. WE'RE STARTING TO SEE OUR INTEREST INCOME GO UP AND THEN FRANCHISE FEES. WE'RE BUDGETING THOSE ABOUT 3% ABOVE FISCAL YEAR 25 ESTIMATES. THOSE GENERALLY CLIMB AS POPULATION CLIMBS. AS YOU CAN SEE, IT'S A IT'S A STEADY SOURCE OF REVENUE.

SO WE WILL BE INCREASING THOSE ABOUT 3%. THERE WE GO. THIS IS ANOTHER KIND OF LEGACY SLIDE.

IT'S BEEN AROUND PROBABLY SINCE OUR FIRST YEARS OF DOING THE BUDGET HERE IN MCKINNEY. I THINK IT'S RELEVANT AND IT KIND OF SHOWS WHERE OUR REVENUES ARE PER CAPITA ON THE GENERAL FUND SIDE AS COMPARED TO OUR SISTER CITIES. THIS NUMBER IS OUR ONE AT $1,016 IS A ESTIMATE FOR FISCAL YEAR 26 AS COMPARED TO THE ADOPTED BUDGETS FROM FISCAL YEAR 25 OF FRISCO, ALLEN AND PLANO JUST SHOWS THAT WE'RE JUST PER CAPITA. WE'RE BRINGING IN JUST A LITTLE BIT LESS REVENUE THAN THAN SOME OF OUR SISTER CITIES. STRAIGHT LINE GRAPH HERE. THIS IS JUST GENERAL FUND REVENUES OVERALL, KIND OF GIVING YOU A FEEL FOR WHERE WE'VE BEEN OVER THE PAST TEN YEARS. OVERALL REVENUES ARE ABOUT A 5.8% INCREASE. FISCAL YEAR 25 ORIGINAL BUDGET TO FISCAL YEAR 26 PROPOSED. THE LAST YEAR'S BUDGET WAS JUST UNDER $220 MILLION IN THE GENERAL FUND.

WE'RE ANTICIPATING A BUDGET OF JUST OVER 230 MILLION FOR FISCAL YEAR 26. THIS IS THE MAKEUP OF THOSE BUDGETS. JUST TO SHOW YOU THERE HASN'T BEEN MUCH CHANGE. YOU CAN SEE THAT PROPERTY TAX AND SALES TAX REMAIN STEADY. FRANCHISE FEES, YOU KNOW, PERCENT UP OR DOWN. EXPECT TO SEE THAT YEAR OVER YEAR. SO FRANKLY, WHAT YOU'RE SEEING HERE IS MEANS WE'RE WE'RE SEEING STEADY GROWTH AND NOTHING REALLY SPIKING ANYWHERE ON OUR REVENUES. AS FOR SOME COMPARISONS OF OUR SISTER CITIES WHERE THEIR REVENUES COME FROM, YOU CAN SEE HERE, ESPECIALLY ON THE PROPERTY AND SALES TAX SIDE, THESE ARE OUR 26 NUMBERS COMPARED TO 25 ADOPTED NUMBERS FROM PLANO, FRISCO AND ALLEN. WE FAIRLY MIRROR ALLEN ON THE. IT USED TO BE MORE SO THAT WE MIRRORED ALLEN ON ON HOW THE REVENUES CAME COME IN WITH YOU KNOW PLANO KIND OF BEING THE OUTLIER WITH SALES AND USE TAX AT WELL OVER 30%. SO YOU CAN SEE KIND OF WE WILL ALSO HAVE THIS COMPARISON SHOWING HOW WE COMPARE EXPENDITURES WITH OUR SISTER CITIES AS WELL. NEXT SLIDE IS PROPERTY TAX REVENUES. OVER TIME YOU CAN SEE THAT STEADY GROWTH ONCE AGAIN IT'S NOT NOT SURPRISING. THIS IS THE LAST TEN YEARS. IT'S A 8% INCREASE FROM FISCAL YEAR 25 TO

[01:40:07]

THE BIG ONE THAT STANDS OUT IS TARIFFS. RIGHT NOW THE CORPORATE WORLD IS SORT OF TAKING THE POSITION THAT THEY'RE THEY'RE THEY'RE ABSORBING THEM. THEY'RE EATING THEM FOR NOW. THEY'RE NOT GOING TO EAT THEM FOREVER. THEIR SHAREHOLDERS AREN'T GOING TO STAND FOR IT. AND I THINK YOU'RE GOING TO SEE SOME OF THOSE PRICE INCREASES BLEEDING IN AS THIS YEAR GOES ON AND INTO NEXT YEAR.

AS YOU KNOW, TARIFF POLICY HAS CHANGED ABOUT 120 TIMES SINCE IT WAS ANNOUNCED. SO WE'RE NOT SURE WHERE THAT'S GOING TO BE. NOW. SOME OF THOSE PRICE INCREASES WILL REFLECT, WILL BLEED INTO YOUR SALES TAXES BECAUSE IT'S PASSED ON. RIGHT. IF INFLATION IS HIGHER, YOUR SALES TAXES ARE HIGHER. BUT ALSO IT COULD HAVE A SOMEWHAT OF A HEADWIND ON SALES TAXES AS WELL. WE THINK 3.5% IS A GOOD NUMBER FOR MCKINNEY. WE'RE SOMEWHAT RESILIENT TO THE VICISSITUDES OF ECONOMIC ACTIVITY, BUT WE'RE NOT IMMUNE TO IT. AND WE'RE KIND OF KEEPING A CLOSE EYE ON IT. WE HAD A LOT OF INTERNAL DELIBERATION ABOUT WHERE WE THINK SALES TAXES ARE GOING TO BE. WE THINK 3.5% IS A GOOD NUMBER, BUT WE'LL BE KEEPING A CLOSE EYE ON IT AND WE'LL BE APPRIZING YOU AS THE BUDGET YEAR PROGRESSES. THANK YOU, MR. GRIMES. ANY QUESTIONS? OKAY. WHERE DO WE GO, TREVOR? YOU UP SIR? GOOD MORNING, MAYOR AND COUNCIL. TREVOR AND BUDGET MANAGER. I'LL BE TAKING YOU THROUGH OUR GENERAL FUND EXPENDITURES IN THE NEXT FEW SLIDES. SO SAME KIND OF SLIDE WE SHOWED ON THE REVENUE SIDE. THESE ARE EXPENSES PER CAPITA FOR US AT LEAST. THE EXPENSE PER CAPITA MIRRORS OUR REVENUES PER CAPITA BECAUSE WE ARE PROPOSING A BALANCED BUDGET WITHIN THE GENERAL FUND. SO SOME OF THE HIGHLIGHTS, SOME OF THE STUFF THAT'S WITHIN THAT GENERAL FUND BUDGET THIS YEAR THAT WE'RE PROPOSING, YOU GOT 5.7 MILLION IN NEW EMPLOYEES AND EQUIPMENT.

ON THE EMPLOYEE SIDE, IT'S ABOUT 27 NEW POSITIONS THAT ARE BEING PROPOSED TO BE ADDED TO THE BUDGET. YOU ALSO HAVE YOUR STEP INCREASES FOR BOTH PUBLIC SAFETY AND GENERAL GOVERNMENT EMPLOYEES. THOSE ARE 2 MILLION, 1.8 MILLION, RESPECTIVELY. AND THEN WE ALSO HAVE ANOTHER BIG ITEM IS OUR TRANSFER TO OUR CAPITAL EQUIPMENT REPLACEMENT FUND. FOR THOSE OF YOU THAT ARE NEWER, OUR EQUIPMENT REPLACEMENT FUNDS, WHERE WE FUND ANY REPLACEMENTS OF ANY OF OUR VEHICLES, POLICE VEHICLES, FIRE ENGINES, WE ALSO FUND IN THERE ANY BIG CAPITAL REPLACEMENTS FOR CITY FACILITIES, YOU KNOW, REPLACING HVAC UNITS, REPLACING ROOFS, STUFF LIKE THAT. THAT FUND IS THERE TO CASH FUND ALL THOSE TYPES OF ITEMS. AND THIS YEAR, SOME OF THE BIGGER ITEMS IN THERE, YOU KNOW, REPLACING 22 MARK POLICE PURSUIT VEHICLES, THOSE COME OUT TO A LITTLE OVER $2 MILLION. A FIRE ENGINE REPLACEMENT WITH ALL THE EQUIPMENT ON IT. THAT'S ABOUT

[01:45:02]

THEY KIND OF GIVE US THEIR RECOMMENDATIONS, WHAT THEY THINK NEEDS TO BE REPLACED, WHAT THEY THINK IS NEARING END OF LIFE. AND THEN WE KIND OF BASE OUR NUMBER OFF THAT. AND THIS YEAR WE'RE LOOKING AT ABOUT $3 MILLION IN UPGRADES AND REPLACEMENTS AT OUR VARIOUS CITY FACILITIES. MR. MAYOR, EXCUSE ME A QUESTION. YES, SIR. JUST OFFLINE AGAIN, SORRY FOR GOING IN THIS AREA, BUT I'D BE CURIOUS ON THE SCHEDULE FOR FUNDED DEPRECIATION ON ASSETS. JUST I'M JUST WANT TO EDUCATE MYSELF ON ALL APPROACH BECAUSE THAT'S A, A MAJOR COMPONENT OF THE BUDGET IS TO FUND THAT DEPRECIATION. BUT OFFLINE I'M JUST CURIOUS THE SCHEDULE AND THE DETERMINATION OF FUNDING DEPRECIATION. SURE THING. AND WITH FUND ACCOUNTING IT'S VERY DIFFERENT THAN IT IS WITH WITH PRIVATE SECTOR ACCOUNTING. EDUCATE ME PLEASE ON ON HOW YOU FUND FOR DEPRECIATION. AND WE DO ATTEMPT TO FUND SOME CASH DEPRECIATION AT SOME LEVEL. BUT REALLY IT NEVER IS EXACTLY WHAT YOU WHAT YOU WANT IT TO BE. BUT WE'LL BE HAPPY TO TALK TO YOU ABOUT THAT.

THANK YOU. SORRY. ALL RIGHT. SO HERE'S JUST SHOWING THOSE TOTAL GENERAL FUND EXPENDITURES FOR THIS UPCOMING YEAR. AGAIN MIRRORS THOSE REVENUES OF $232 MILLION FOR FY 26, WHICH INCLUDES THE 5.7 MILLION IN NEW ASKS OF NEW EMPLOYEES AND EQUIPMENT. OBVIOUSLY, 26 WILL SHOW A LITTLE LOWER THAN 25. THAT'S DUE TO AMENDMENTS WE DO DURING THE YEAR. YOU KNOW, WE CALL REAPPROPRIATIONS OF ITEMS, MAYBE THAT MOVE FROM ONE YEAR TO THE NEXT THEY WEREN'T ABLE TO RECEIVE IN THAT FISCAL YEAR. AND THEN ALSO BUDGET AMENDMENTS, FOR EXAMPLE, IN THE BIG ONES WE HAD THIS YEAR IN 25 WAS ABOUT 1.7 MILLION FOR OUR TRUCK. FIRE TRUCK OVER AT THE AIRPORT. BUT THAT'S JUST KIND OF WHY YOU SEE THAT DISCREPANCY THERE FROM 25 END OF YEAR TO 26. RIGHT? NEXT IS JUST OUR MAKEUP IN THE GENERAL FUND. YOU'LL SEE, OF COURSE, ABOUT HALF THE HALF THE PIE. THERE IS PUBLIC SAFETY. AND THEN YOU HAVE YOUR DIFFERENT DEPARTMENTS THERE, YOUR GENERAL GOVERNMENT DEVELOPMENT SERVICES, PUBLIC WORKS, THOSE HAVE ALL ALL THOSE SPLITS HAVE RELATIVELY REMAINED THE SAME FROM LAST YEAR TO THIS YEAR. AND IN THESE UPCOMING SLIDES, WE'LL KIND OF GO A LITTLE DEEPER INTO EACH ONE OF THOSE PIECES OF THE PIE. ALL RIGHT. SO HERE AGAIN WE'RE COMPARING TO OUR SISTER CITIES. AGAIN THIS IS WHAT THEY ADOPTED LAST YEAR FOR THIS CURRENT YEAR OF FISCAL YEAR 25 VERSUS WHAT WE'RE PROPOSING FOR 26. YOU'LL SEE AGAIN PUBLIC SAFETY. WE'RE ALL ABOUT RELATIVELY THE SAME RANGE AS EACH OTHER, KIND OF THE UPPER 40% NUMBER. AND PLANO IS UP THERE AT 50%. EVERYTHING ELSE RELATIVELY COMPARABLE. YOU KNOW, OUR DEVELOPMENT SERVICES KIND OF IN THE MIDDLE OF THE PACK OF EVERYBODY. WE ARE HIGHER IN OUR PUBLIC WORKS SPENDING, BUT THEN A LITTLE LOWER WHEN IT COMES TO OUR PARKS AND LIBRARY. AGAIN, THESE ARE IT'S A GOOD COMPARISON TO MAKE. THEY'RE NOT ALWAYS EXACTLY APPLES TO APPLES THOUGH, BECAUSE ESPECIALLY GENERAL GOVERNMENT, DIFFERENT CITIES MAY GROUP DIFFERENT DEPARTMENTS. THEY HAVE WITHIN EACH SECTION ALSO TOO, ESPECIALLY WHEN IT COMES TO THE TRANSFERS. YOU KNOW, I MENTIONED WE MAKE THAT BIG TRANSFER OVER TO OUR REPLACEMENT FUND. YOU KNOW, SOME OF THESE OTHER CITIES MAYBE LIKE FRISCO, THEY MAY FUND THAT STUFF JUST WITHIN THEIR GENERAL FUND WITHOUT A TRANSFER. BUT AGAIN, THIS IS ONE OF ADAM, THE THIRD PART OF. WORK. THAT'S CORRECT. YEAH. IT'S. YES SIR. YEAH. IT'S WHY IT'S, IT'S GOOD TO LOOK AT AND COMPARE. BUT YEAH, THEY MAY ALLOCATE THINGS DIFFERENTLY.

THEY MAY HAVE REPLACEMENTS FOR THOSE PARK FACILITIES OR SOMETHING LIKE THAT. MAYBE THOSE ARE MAYBE THEY'RE TAKING CARE OF THOSE WITHIN THAT BUDGET, WHEREAS WE KIND OF HAVE THOSE ALLOCATED IN OUR PUBLIC WORKS BUDGET. YEAH, IT'S GOOD TO SHOW. BUT WE DON'T WE DON'T BENCHMARK BY IT FOR, FOR VERY MUCH BECAUSE IT IS VERY MUCH APPLES TO ORANGES. FOR INSTANCE, THE CITY I WAS IN, YOU KNOW, PREVIOUSLY WAS LONG, LONG AGO, BUT JUST JUST AS A COMPARISON AND I THINK I'VE PROBABLY SAID THIS BEFORE, THEIR SOLID WASTE, THEIR TRASH COLLECTION, THEY DID IT THEMSELVES. IT WAS INSIDE THEIR GENERAL FUND. SO OF COURSE IT INFLATED, YOU KNOW, THE REVENUES AND THE EXPENSES ON PUBLIC WORKS SIDE JUST BECAUSE IT'S APPLES TO ORANGES FUND ACCOUNTING ALLOWS FOR US TO DO THINGS A LITTLE DIFFERENTLY. YOU KNOW, ESPECIALLY CITY TO CITY. SO IT'S

[01:50:05]

ALL OF OUR LEASES HAVE EXPIRED THIS UPCOMING FISCAL YEAR, WITH THE EXCEPTION OF 210 NORTH TENNESSEE. THAT IS WHERE OUR IT AND UB DEPARTMENTS WERE LOCATED. HOWEVER, THERE IS A PROVISION IN THE LEASE THAT WE MAY CANCEL THE LEASE IF CITY COUNCIL FAILS OR REFUSES TO BUDGET SUFFICIENT FUNDS FOR THE CONTINUATION OF THE LEASE. PAUL CITY MANAGEMENT HAS PROVIDED NOTICE TO THE LANDLORD THAT WE DO INTEND TO EXCLUDE RENT APPROPRIATIONS IN THE FY 26 BUDGET TODAY. WE'RE JUST SEEKING YOUR AGREEMENT ON THAT. AGREEMENT. AS IN, YOU WANT NODDING OF HEADS AT THIS MOMENT, OR WILL WE HAVE AN OPPORTUNITY AT THE END OF THE MEETING? THERE'S NO VOTE. THERE'S NO THERE'S NO WE'LL HAVE IT IN THE BUDGET AS IT'S LISTED IN THE SLIDE AS BEING NON APPROPRIATED.

SO KIND OF UNLESS YOU HAVE SOME OBJECTIONS OKAY. YES SIR. ULTIMATELY WHEN YOU ADOPT THE BUDGET THAT IS IN SEPTEMBER THAT IS THE ULTIMATE. WHETHER OR NOT YOU AGREE WITH THAT, THIS IS WE'RE JUST MAKING SURE THAT WE'RE PROVIDING THIS NOTICE IN THE PUBLIC. ALL RIGHT. NEXT UP IS ABOUT HALF THE PIE CHART. THERE'S OUR PUBLIC SAFETY ABOUT $110 MILLION BETWEEN POLICE AND FIRE OF COURSE. AND OUR $232 MILLION GENERAL FUND BUDGET. IN TOTAL, ABOUT 636 POSITIONS BETWEEN POLICE AND FIRE, WITH JUST OVER 500 OF THOSE ARE SWORN POSITIONS. YOU KNOW, POLICE OFFICERS, DETECTIVES, FIREFIGHTERS, CHIEFS. THE NEW ADDITIONS THIS YEAR INCLUDE NINE SWORN POSITIONS. SO AS YOU CAN SEE, THERE ARE TWO FIRST RESPONDERS, ONE SERGEANT, A DETECTIVE, THE NIBRS SPECIALIST PAUL MENTIONED EARLIER, AND THEN ANOTHER FIVE SWORN IN THE FIRE DEPARTMENT, FOUR FIREFIGHTERS AND A BATTALION CHIEF. OKAY. NEXT UP ARE DEVELOPMENT SERVICES AGAIN. IS SHE THERE? $17 MILLION OF OUR GENERAL FUND BUDGET ARE ALLOCATED TO OUR DEVELOPMENT SERVICES DIVISION. THIS INCLUDES YOUR PLANNING, YOUR ENGINEERING, YOUR BUILDING INSPECTIONS, YOUR CODE COMPLIANCE DEPARTMENTS, WHICH ALSO INCLUDES ANIMAL SERVICE, ANIMAL SERVICES. SO WE GOT THREE NEW FTES PROPOSED HERE. TWO ARE ONLY SHOWN UP THERE, THE OTHER ONE BEING AN ANIMAL SERVICE TECHNICIAN. THESE ADDITIONS, WITH SOME SALARY INCREASES, HAVE INCREASE THE BUDGET ABOUT 800 GRAND FROM LAST YEAR. ALSO IN THERE IS A NEW CRASH SOFTWARE. THIS IS FOR

[01:55:06]

A PARK RANGER THAT KIND OF HELP PATROL THE CITY PARKS, HELP CURTAIL VANDALISM, OTHER VIOLATIONS, WHAT HAVE YOU, AND ALSO KIND OF MANAGE THE WILDLIFE IN SOME OF OUR PARKS. AND THEN THE TWO COORDINATORS THERE, THE PLANETARIUM AND EXHIBITS COORDINATOR ARE FOR THE LIBRARY.

THOSE GO HAND IN HAND WITH THE RENOVATIONS THAT ARE BEING DONE OVER AT THE HALL LIBRARY. THAT SHOULD BE COMPLETED NEXT YEAR. LET'S SEE. AND NOW YOU HAVE PUBLIC WORKS. SO AGAIN, ANOTHER $21 MILLION ALLOCATED THERE IN THE GENERAL FUND THERE. YOU DO HAVE TWO STREET MAINTENANCE TECHS AND EQUIPMENT FOR CONCRETE REPAIR. THOSE ARE TOGETHER. THOSE BOTH WILL BE FUNDED IN THE STREETS DEPARTMENT. PART OF THAT EQUIPMENT IS A CONCRETE VOLUMETRIC TRUCK. QUICKER.

THEY'RE NEEDING ALL THOSE FOR QUICKER RESPONSE TIMES WHEN IT COMES TO CONCRETE REPAIR THAT THEY MAY BE DOING, THAT CITIZENS MAY REACH OUT AND REQUEST. AND THEN IN ADDITION TO THAT IS AN HVAC TECH TO HELP WITH PREVENTATIVE MAINTENANCE THROUGHOUT ALL OF OUR CITY FACILITIES. I WANT TO JUST ADD A COMMENT ON THE VOLUMETRIC TRUCK. WE HAVE ONE ALREADY. I BELIEVE IN THE PUBLIC WORKS DEPARTMENT. IT'S FAIRLY NEW. IT HAS GREATLY IMPROVED OUR THROUGHPUT WITH RESPECT TO CONCRETE REPAIRS, PARTICULARLY WITH SMALLER JOBS, SIDEWALKS. THE TRUCKS ARE ACTUALLY REALLY AMAZING TECHNOLOGY. TECHNOLOGY DOESN'T HAVE TO BE SOFTWARE AND COMPUTERS. THERE'S AN AWFUL LOT OF TECHNOLOGY THAT CAN BE DEPLOYED OUT IN THE FIELD.

THEY'RE ALLOWED. THE EQUIPMENT ALLOWS US TO CHANGE OR VARY THE MIX OF CONCRETE DEPENDING ON THE ACTUAL DEPLOYED USAGE, AND WE CAN VARY OR PRODUCT MIX IF YOU WANT TO CALL IT THAT. THE BIGGER JOBS ARE LEFT FOR CONTRACTING COMPANIES OR TYPICAL CONCRETE CREWS, AND THEN THE VOLUMETRIC TRUCKS WILL FOCUS ON SMALLER STUFF. THE REASON WHY THAT'S AN ADVANTAGE IS, YOU KNOW, WHEN YOU MAKE AN ORDER FOR CONCRETE, YOUR CONCRETE COMPANIES WILL WAIT UNTIL YOU GET A CERTAIN BUNDLE OF THEM TOGETHER, WHEREAS YOUR VOLUMETRIC TRUCKS CAN GO OUT AND KNOCK OUT THOSE SMALLER JOBS A LOT MORE EFFICIENTLY. AND IT'S A LOT OF IT'S AUTOMATED, SO YOU DON'T NEED AS MUCH CREW TO GO OUT AND DO IT. SO THAT ALONG WITH OUR OUR PATCHING TRUCK, FOR EXAMPLE, THE AUTOMATED PATCHING TRUCK CAN BE OPERATED WITH ONE PERSON IS AGAIN, THOSE ARE TYPES OF THINGS OF HOW WE TRY TO INVEST IN EQUIPMENT TO INCREASE OUR PRODUCTIVITY, TO BE ABLE TO MAINTAIN THE INFRASTRUCTURE THAT WE HAVE. SO THE CONCRETE TRUCK WE THOUGHT WAS, LET'S GET ANOTHER ONE OF THOSE BECAUSE THEY'RE WORKING VERY WELL. MR. MAYOR, MAY I ASK A QUICK QUESTION ON THIS? YEAH, A COUPLE OF THINGS ON STREET REPAIRS. I WAS NOTICING IN SOME OF YOUR NOTES THAT IT WAS A 7.5% BUDGETARY INCREASE OVER PRIOR YEAR, AND MY COMMENT IS, IS STREET REPAIRS BEING A HIGHER PRIORITY? THAT'S SOMETHING THAT I'M DEFINITELY INTERESTED IN, IN PUSHING. AND I ACKNOWLEDGE THAT A LOT OF STREET REPAIRS, SOME OF THEM CAN BE COVERED UNDER CDC AND DC AND NEW BOND ISSUES. BUT IF IT'S YOUR POTHOLE OR YOUR SIDEWALK AND IT'S NOT UNDER ONE OF THOSE MAJOR PROJECTS, THE PERCEPTION IS THAT THAT WE'RE FALLING BEHIND ON STREET REPAIRS. SO WHAT I'M CHALLENGING THE STAFF TO DO IS, IS 7.5% SOUNDS ON A PERCENTAGE BASIS, A PRETTY GOOD INCREASE, BUT IT'S ON A SMALL BASELINE. SO WHAT CAN WE DO TO PUT MORE FUNDS INTO THE GENERAL FUNDS, INTO REPAIRS AND MAINTENANCE OF THE STREETS? I MEAN, I KNOW WE HAVE A YOU HAVE A FANTASTIC PROCESS OF INVENTORYING THE STREETS AND AGING THE STREETS, BUT I CAN ASSURE YOU THAT THE PERCEPTION IS ROUTINE. POTHOLES, WHICH I WILL ACKNOWLEDGE. MR. CITY MAYOR, IS THE BANE OF YOUR EXISTENCE. IS AN ISSUE, AND THE PERCEPTION IS THAT WE ARE FALLING BEHIND IN THAT ROUTINE MAINTENANCE. SO I'M GOING TO CHALLENGE. AND I KNOW WHEN YOU'RE TWEAKING THE BUDGET, YOU'RE ASKING FOR AN OFFSET. SO I'M NOT ASKING FOR AN ANSWER TODAY. BUT BUT I DO FEEL LIKE THAT NEEDS TO BE A HIGHER PRIORITY IN FIXING ROUTINE POTHOLES AND SIDEWALKS. AND TRUST ME, I'M HEARING IT. IF I'M NOT IN ONE OF THOSE BIGGER PROJECTS, I DON'T SEE IT

[02:00:04]

THE COUNCIL AND THE BOARD SAID, WE REALLY DON'T WANT TO DO THAT. LET'S FIND ANOTHER WAY TO DO IT.

ANOTHER WAY TO DO IT WAS DIVERTING SOME OF THE GROWTH IN REVENUES FROM SALES TAXES INTO EDC AND CDC, RESPECTIVELY. THEY SET A BASE YEAR, AND 50% OF THAT GROWTH IN THOSE SALES TAXES WOULD BE DIVERTED AND DEDICATED TOWARD ROAD CONSTRUCTION. BY DOING THAT, THEY CAN'T DO MAINTENANCE WITH CDC AND EDC FUNDS, BUT BY PUTTING IT TOWARD ROAD CONSTRUCTION, THAT FREES UP MONEY ON THE BACK END TO DO MORE ON THE MAINTENANCE SIDE. AND THAT IS PART OF OUR STRATEGY.

BUT BECAUSE IT'S KIND OF FEELS LIKE A TOURS, AS THAT MONEY INCREASES OVER TIME, THAT FUND WILL GROW OVER TIME. BUT WE'RE IN THE EARLY YEARS OF IT YET. BUT IN THE COMING YEARS, THAT'S GOING TO BE A SIGNIFICANT AMOUNT OF FUNDING TO HELP WITH THAT. AND I THINK THAT'S GREAT. ALL I'M ASKING IS BACKFILL ON THE ROUTINE MAINTENANCE AT A QUICKER PACE. UNDERSTAND? THANK YOU. SO, PAUL, YOU KNOW, I COULDN'T LET THAT GO WITHOUT ADDING TO IT BECAUSE I THINK HE'S EXACTLY RIGHT. BUT LAST YEAR WE HAD A PRESENTATION THAT KIND OF LOOKED AT WHAT WERE OUR PCI SCORES WHEN WE DID A PCI RATING. WHAT HAVE WE ADDRESSED SINCE THEN? AND GARY CAME IN ABOUT TEN MINUTES AGO, AND I WAS GLAD HE DID FOR THIS. BUT I DO THINK THAT THOSE ARE VALUABLE TO LOOK AT EVERY YEAR TO MAKE SURE THAT WE ARE GAINING GROUND AND NOT CONTINUING TO LOSE GROUND, BECAUSE WE DID MOVE A LOT OF LEVERS TO SAY, WE WANT TO DEAL WITH THIS, BUT WE'VE GOT NO, I GUESS. EVIDENCE THAT IT'S GOTTEN BETTER OR THAT IT'S GETTING WORSE. I KNOW WE'VE ENGAGED A NEW PCI STUDY. I THINK THAT'S SUPPOSED TO BE DONE EITHER TOWARDS THE END OF THIS YEAR OR SOMETHING, BUT KIND OF LOOKING AT WHEN WE IDENTIFY THAT WE'VE GOT X NUMBER OF ROAD MILES THAT ARE WE CONSIDER FAILED ROADWAYS AND WHAT PACE ARE WE IMPROVING THOSE, HOW ARE WE DEALING WITH THOSE? WE CAN MAKE THOSE ESTIMATIONS BASED ON THESE MAPS THAT WE'RE PRODUCING. BUT JUST HOW DO WE KNOW THAT WE'RE DOING ALL OF THE RIGHT THINGS OR WE'RE DOING ENOUGH? YOUR PCI SCORES ARE GOING TO BE A KEY MEASURE AS WE UPDATE THOSE. I WILL JUST SAY THAT IT'S LIKE TURNING AN AIRCRAFT CARRIER AROUND. YOU'RE GOING TO HAVE MOMENTUM THAT IS GOING TO BE KEEPING THEM TO MOVE AND TO TURN IT AROUND AND TO CHANGE THAT TRAJECTORY TAKES BUDGET CYCLES, NOT ONE BUDGET CYCLE. AND WE WILL CONTINUE TO WORK ON IT IS KEEP GOING. IT'S A GREAT ANECDOTAL EXAMPLE. IT'S TWO SEPARATE TYPES OF SERVICES THAT WE PROVIDE. BUT WE TALKED A LITTLE EARLIER ABOUT THE WATER LINE REPLACEMENT PROGRAM. WE WERE IN A IN A SITUATION VERY SIMILAR WHERE WE DID NOT HAVE A WATER LOSS PERCENTAGE THAT WE THOUGHT WAS ACCEPTABLE IN THE COUNCIL, DIDN'T THINK WAS

[02:05:02]

AND HOW DO WE KNOW THAT WE'VE MOVED ENOUGH? HOW DO WE KNOW WE SHOULDN'T BE MOVING MORE? AND YOU LET US LET US HAVE GARY GRAHAM COME UP. I'M JUST GOING TO I'M GOING TO GET OUT OF THE WAY. AND THESE SLIDES THAT I WAS GOING TO. DO YOU MIND PRESENTING THESE NEXT FEW SLIDES AND YOU CAN WALK THEM THROUGH THIS. THANK YOU. GARY GRAHAM DIRECTOR OF ENGINEERING. THANK YOU. MARK.

GARY GRAHAM DIRECTOR OF ENGINEERING. SO I THINK THE ANALOGY THAT MR. GRAHAM'S GAVE ABOUT TURNING THE BATTLESHIP IS A GOOD ONE. WE GOT THE DIRECTION IN THE SUMMER OF 22. THE BUDGET FOR 23 WAS PRETTY WELL SET AT THAT TIME WHEN WE GOT THAT DIRECTION. AND SO YOU'LL SEE HOW WE'VE SHIFTED OUR SPENDING TO TRY TO, TO ADDRESS THE CONCERNS THAT WE HEARD FROM COUNCIL. I WISH WE HAD A, A METRIC THAT WE COULD SHOW THAT SHOWS THAT EVERY LEVER WE'RE PULLING IS THE RIGHT LEVER IMMEDIATELY. IT DOES TAKE A LITTLE BIT OF TIME TO YOUR POINT, MR. BELLER. SO THIS FIRST SLIDE WE HAVE HERE IS A STREET RECONSTRUCTION UPDATE. SO FROM 2022 TO NOW, WHAT ARE THE PROJECTS THAT WE'VE BEEN WORKING ON WITH THOSE? ALL THE VARIOUS DIFFERENT PROGRAMS THAT WE'RE WORKING ON. WE HAVE THE STREET RECONSTRUCTION. WE HAVE THE UTILITIES UNDERLYING THE STREETS THAT ARE THE MAIN DRIVER OF SOME STREET RECONSTRUCTION. AND, YOU KNOW, SO WE HAVE RESIDENTIAL STREETS THAT HAVE NO CURB AND GUTTER. SO WE'RE TRYING TO DO WORK ON ALL OF THEM. ONCE WE CAN SPEND ALL OUR MONEY ON ONE SET OF PROGRAMS. BUT A TYPE OF PROJECT LIKE STREETS WITH NO CURB AND GUTTER TO GET THEM UP TO A CERTAIN STANDARD. BUT THEN WE FALL BEHIND ON THOSE STREETS THAT HAVE UNDERLYING UTILITIES WITH PROBLEMS. SO WE HAVE TO SPREAD THOSE RESOURCES AROUND AND TRY TO ADDRESS ALL THE DIFFERENT PROGRAMS AND MAKE PROGRESS ON ALL OF THEM. SO BUT THIS SHOWS YOU THE BLUE STREETS OF OUR PROJECTS WE'VE COMPLETED SINCE 2022. THE RED STREETS ARE ONGOING DESIGN PHASE OR, YOU KNOW, GETTING READY TO GO UNDER DESIGN. THE YELLOW ONES ARE THE ORANGE ONES. EXCUSE ME, THEY HAVE ONGOING CONSTRUCTION AND THEN THE GREEN STREETS SHOW ALL THE PLANNED CONSTRUCTION STARTS IN THE NEXT YEAR. I WILL SAY WE HAVE A LOT OF PROJECTS THAT ARE FINALIZING THE DESIGN PHASE, BUT OUR UTILITY RELOCATION HAS BEEN A STRUGGLE. WE HAVE ATMOS HAS A LOT OF UTILITY LINES IN THIS AREA THAT ARE NOT DEEP ENOUGH. AND SO WHEN WE GO TO RECONSTRUCT THE STREET, WE ARE ENCOUNTERING THEIR UTILITY. AND SO WE HAVE TO SLOW OUR PACE OF OUR RECONSTRUCTION DOWN FOR UTILITY, FOR THE UTILITY COMPANY TO GET THEIR THEIR RESOURCE OUT OF THE WAY. SO WE HAVE A LOT OF CONVERSATIONS WITH ATMOS. WE'RE NOT HAPPY WITH THE PROCESS. THE.

HOW FAST THEY'RE DOING THEIR WORK. AND SO WE A LOT OF CONVERSATIONS WITH THEM TRYING TO GET MORE RESOURCES HERE, BUT THEY ARE HAVING SOME OF THE SAME STRUGGLES THAT EVERYBODY'S HAVING, GETTING THE RIGHT STAFF AND GETTING THE AMOUNT OF STAFF TO DO ALL THE WORK THAT'S IN FRONT OF THEM. SO NEXT SLIDE PLEASE. SO THIS KIND OF SHOWS YOU HOW WE ARE FUNDING OUR STREET PROGRAM. IN 2028 OR 2018. YOU CAN SEE WE DIDN'T HAVE VERY MUCH MONEY. WE SOLD FOR RECONSTRUCTION BONDS FOR RECONSTRUCTION AT ALL. MOST OF THAT WAS THE GREEN WAS GENERAL

[02:10:01]

AND THEN THE BLUE WAS PROJECTS RELATED TO NEW CONSTRUCTION, NEW CAPACITY TYPE. YOU CAN SEE, YOU KNOW, THAT WAS KIND OF THE TREND IN 2020 2021. WE HAD MORE STREET RECONSTRUCTION, LESS NEW STREET, NEW STREET PROJECTS. BUT THEN WE WE'VE GOT THE NEW BOND PROGRAM UP AND RUNNING 2019. WE HAD THAT $100 MILLION BOND PROGRAM THAT STARTED REALLY FUNDING SOME OF THESE PROJECTS. 2022 WE GOT THE DIRECTION. SO YOU SEE 2022 AND 2023 ABOUT THE SAME, BUT NOW 2425 AND ON COUNCIL SAID, HEY, WE WANT TO SEE A MINIMUM OF $20 MILLION GOING TOWARDS RECONSTRUCTION. SO WITH THAT GREEN GENERAL FUND AND THEN THE AMOUNT OF BOND SALES THAT WE'RE SHOWING FOR RECONSTRUCTION, WE HAVE THAT EMPHASIS. SO WE HAVE NOW PUT IN THAT MONEY STARTING IN 24, 25 AND IN THE FUTURE, TRYING TO HIT THAT RED LINE, TARGET, THAT $20 MILLION WITH A 3% INCREASE IS THAT RED LINE.

AND THAT'S SHOWING YOU WHAT WE'RE TRYING TO ACHIEVE IN THAT STREET RECONSTRUCTION. BASED ON THE DIRECTION WE GOT FROM COUNCIL. WE DO STILL HAVE A LOT OF NEEDS OF NEW CONSTRUCTION, NEW CAPACITY SHOWN ABOVE. AND WE SHOW YOU HOW THAT, THAT, THAT BLACK AND WHITE HATCHED IS THAT EDC, CDC SALES TAX OFFSET AND HOW THAT'S SLOWLY INCREASING SINCE 2024. YES, SIR. YEAH, A QUESTION YOU SAID THE 20 MILLION RECONSTRUCTION. I GUESS THAT'S KIND OF MY BACK OF MY MIND. IS THAT SIGNIFICANT? IT'S A SIGNIFICANT ENOUGH AMOUNT TO ACCOMPLISH WHAT WE WANT TO ACCOMPLISH, BECAUSE I'VE HEARD THAT THE 20 MILLION MAY ACTUALLY BE SLIGHT FOR WHAT WE NEED TO BE PUTTING IN THERE. SO IT ALL GOES BACK TO AS A COMMUNITY, WHAT DO WE WANT TO ACCEPT? AND SOME REFERENCE WAS MADE TO MR. GILLINGHAM, THE DIRECTOR OF PUBLIC WORKS PRESENTATION, SHOWING WHAT OUR PCI SCORES WERE FROM OUR 2021 STUDY. AND WE HAVE THESE BANDS AND, YOU KNOW, DEPENDING ON WHAT YOU WANT TO SPEND, YOU KNOW, YOU'RE GOING TO SEE WE STILL MAY BE AN ACCEPTABLE LEVEL OF, YOU KNOW, CONDITION, BUT THAT THAT OUR PAVEMENT MAY BE DETERIORATING A LITTLE BIT. YOU KNOW, IT'S AN AVERAGE ACROSS THE ENTIRE CITY IF YOU WANT, DEPENDING ON WHAT LEVEL OF CONDITION YOU WANT TO ACCEPT AND THE COUNCIL WANTS US TO PUT, YES, WE CAN SPEND MORE MONEY ON IT. IT'S GOING TO TAKE AWAY FROM OTHER RESOURCES AND OTHER PROJECT TYPES, IF THAT'S IF THAT'S THE DIRECTION. SO BECAUSE IT TAKES A LITTLE BIT OF TIME TO SEE THE, YOU KNOW, THE INPUT OF PUTTING DOLLARS AND DOING THOSE RECONSTRUCTION PROJECTS BECAUSE OF THE TIME IT TAKES TO DO THE CONSTRUCTION. WE CAN'T DO THESE PCI EVALUATIONS EVERY YEAR. YOU'RE NOT GOING TO SEE THE EFFECTIVENESS OF THE DOLLAR SPENT. SO THAT'S WHY WE'RE DOING THEM EVERY 4 TO 5 YEARS. SO EARLY NEXT YEAR WE'LL SHOW YOU THAT SAME CHART THAT WE SHOWED YOU A FEW YEARS AGO AND WHERE THAT WHERE THAT $20 MILLION IS GETTING US. AND IF WE NEED TO MAYBE CHANGE COURSE AND RATCHET THAT NUMBER UP, I APPRECIATE THAT. BUT THERE WAS, YOU KNOW, COMMENTS MADE THAT THE 20 MILLION PROBABLY WASN'T MAINTAINED. THE BEND OF THE CURVE, IF YOU WILL, SO TO SPEAK.

AND THAT THAT'S MY BIGGER QUESTION, IS IT KEEPS US IN THE SAME DISCUSSIONS ABOUT THAT BEING SIGNIFICANT ENOUGH. SO IT KEEPS US IN THE SAME BAND, BUT IT'S NOT IMPROVING IT, BUT IT'S NOT IMPROVING. AND WE'RE PROBABLY GOING DOWN A LITTLE BIT. YOU'RE RIGHT. THAT'S THAT'S THE CLARIFICATION I WANTED TO HEAR. NEXT SLIDE PLEASE. AND SO THIS SHOWS YOU HOW OUR HISTORICAL SPENDING HAS HAPPENED. AND YOU KNOW SO THE RED LINE IS THE NEW CONSTRUCTION NEW CAPACITY TYPE PROJECTS. THE GREEN WAS HAS BEEN THE RECONSTRUCTION TYPE EFFORTS. AND SO YOU CAN SEE IN THAT 23 TO 24 YOU SEE THAT SLIGHT UPTICK. WE GOT THE DIRECTION IN 22. SO 23 WE STARTED SPENDING MONEY ON DESIGN GETTING THAT MONEY PROJECTS THROUGH DESIGN IN 23 AND 24. AND SO NOW YOU SEE IT IN 2526. YOU'RE SEEING A BIG INCREASE IN THE AMOUNT OF MONEY BEING SPENT BECAUSE THE REAL DOLLARS HAPPEN. THE REAL SPENDING HAPPENS WHEN PROJECTS GO TO CONSTRUCTION. AND SO YOU CAN SEE THAT TREND PROJECTED 25, 26, 27 THAT THAT RECONSTRUCTION NUMBER SAYS STAYS PRETTY HIGH. AND I THINK THAT'S THE LAST SLIDE. ONE MORE. OKAY. SO COUNCILMAN BAUER, YOU HAVE ASKED SEVERAL TIMES OF, YOU KNOW, STREET CENTERLINE MILES COMPARED TO WHAT OUR PCI SCORES OF 25 OR LESS. AND SO WE'VE UPDATED THIS CHART BASED ON THE WORK THAT WE HAVE COMPLETED AND KIND OF GET TO THE PACE OF RECONSTRUCTION THAT YOU ALLUDED TO A FEW MINUTES AGO. WE'VE COMPLETED WE HAD 31 MILES, ROUGHLY OF STREETS THAT HAD PCI SCORE OF LOWER THAN 25. WE HAVE COMPLETED THE RECONSTRUCTION OF OVER 11 OF THOSE MILES. WE HAVE EIGHT IN THE PLANNED CONSTRUCTION PORTION, AND THEN WE HAVE JUST UNDER 12 DEFERRED THAT STILL STILL NEED STILL NEED ATTENTION. SO THE LAST TIME WE SHOWED YOU THIS, I GUESS I PROBABLY SHOULD HAVE LEFT THAT ON HERE. WE'D ONLY COMPLETED ABOUT I WANT TO SAY 3 TO 4 MILES. AND SO WE'VE MADE QUITE A BIT OF PROGRESS OVER THE LAST YEAR AND A HALF, TWO YEARS SINCE WE SHOWED YOU

[02:15:04]

AS PART OF OUR GENERAL FUND EXPENDITURES, WE DO SHOW OUR GRANTS TO COMMUNITY. YOU HEARD PAUL'S OPENING REMARKS, MENTIONED THAT $781,000 NUMBER. THIS IS WHAT MAKES UP THAT NUMBER THAT WE HAVE IN THE GENERAL FUND. YOUR ARTS COMMISSION GRANTS, COMMUNITY SUPPORT GRANTS, NEIGHBORHOOD ENGAGEMENT GRANTS, WHICH IS A NEW PROGRAM THIS YEAR. AND THEN YOUR DOWNTOWN SECURITY, WHICH DIDN'T INCREASE FROM LAST YEAR TO THIS YEAR. AND THEN ALSO YOUR THE PROGRAMS LIKE VOLUNTEER MCKINNEY, PECAN GROVE, AND THEN YOUR DOWNTOWN HOLIDAY DECORATIONS. THOSE ARE ALL WHAT MAKE UP THAT $781,000 NUMBER THERE. I WILL I WILL JUST ADD TO THIS THAT A REQUEST I KNOW WAS MADE BY COUNCILMAN CLOUTIER. HE MAY HAVE COPIED YOU ALL ON IT OR MENTIONED IT TO YOU, BUT HE HAS SUGGESTED OR ASKED REALLY UP TO THE CITY COUNCIL. WHEN WE ADOPT THE BUDGET, HE'S ASKED THAT VOLUNTEER MCKINNEY BE THAT FUNDING BE MOVED TO THE I'M SORRY THE COMMUNITY SUPPORT GRANTS. THE COMMUNITY SUPPORT GRANTS, AS YOU KNOW, HAS A YOU HAVE A COMMISSION OR A BOARD THAT REVIEWS, INVITES, APPLICATIONS FOR COMMUNITY SUPPORT GRANTS. THERE'S A CERTAIN DISCIPLINE, IF YOU WILL, IN PROCESS FOR THAT.

HISTORICALLY, VOLUNTEER MCKINNEY HAS BEEN DIRECT FUNDED, AS IS INDICATED HERE, SORT OF A SEPARATE ITEM. THAT MONEY. WHEN I GOT HERE, I THINK IT WAS AROUND $68,000. IT'S GROWN TO 75,000. THEY DO A LOT OF WORK FOR THE COMMUNITY. IT REALLY WE'RE, YOU KNOW, SORT OF AMBIVALENT ABOUT IT. IT'S UP TO THE CITY COUNCIL, IF YOU'D LIKE THAT, TO GO THROUGH THE PROCESS OF COMMUNITY SUPPORT GRANTS. WE CAN TAKE THAT $75,000 AND FOLD IT INTO COMMUNITY SUPPORT GRANTS, WHICH WOULD, OF COURSE, INCREASE THAT NUMBER TO $405,000. IF WE DID THAT. OKAY, YOU DON'T HAVE TO ANSWER IT NOW, BUT YOU CAN GIVE US A GREEN LIGHT OR A NOD NOW IF YOU WANT.

OR WE CAN WAIT TILL LATER. BUT JUST KNOW THAT THAT REQUEST IS OUT THERE. THAT'S KIND OF MY SUGGESTION TOO. BUT I JUST WANTED TO MAKE SURE WE GO THROUGH SOME OF THE MICROPHONE OR ALL THE OTHER FUNCTIONS ON THE HERE. THESE ARE CITY FUNCTION, LIKE THE ARTS COMMISSION OR THESE. LIKE PART OF THE CITY LIKE MY I GUESS MY THOUGHT IS IF IT'S NOT PART OF THE CITY, IT SHOULD JUST BE GOING INTO THE COMMUNITY GRANTS AND LET THEM APPLY FOR THE GRANT. AND I MEAN, OBVIOUSLY, I SEE VOLUNTEER MCKINNEY DOWNTOWN HOLIDAY DIRECTION, I MEAN DECORATIONS, THAT'S THAT'S A CITY FUNCTION. SO I THINK THAT STAYS WHERE IT'S AT. BUT THE ARTS COMMISSION, I MEAN, AGAIN, IS THAT THAT'S US, THAT'S US. SO AGAIN, THAT STAYS. BUT ANYTHING OUTSIDE OF CITY, A CITY FUNCTION I THINK SHOULD GO INTO THE COMMUNITY SUPPORT GRANTS AND LET THEM APPLY FOR THE GRANT. YOU KNOW, AND MAYBE THAT'S A, YOU KNOW, FOR THE COUNCIL, MAYBE WE INCREASE THAT BUDGET. YOU KNOW, WE GIVE SOME DIRECTIONS THAT MAYBE INCREASE THAT EVEN BEYOND THE 75. BUT I JUST YEAH, I DON'T LIKE THE IDEA OF JUST GIVING OUT, YOU KNOW, JUST HAVING IT A LINE ITEM FOR. YEAH. YEAH. I THINK THE PART OF THE VALUE WHEN WE DID MOVE SOME OF THEM LAST TIME WAS SO THAT THEY WOULD MAKE THAT APPLICATION. THAT'S CORRECT. EVERY YEAR, AND THAT

[02:20:01]

JUST THEY'RE GOING TO HAVE TO DEAL WITH A BUNCH OF CHANGE AND DISRUPTION AND POTENTIAL BURDEN OVER THE NEXT FEW YEARS. SOMETHING TO THINK ABOUT IS THEY MIGHT TRY TO ABSORB THAT WITH MAYBE ADDITIONAL TRASH THAT GETS PUT ON THEM, OR THOSE SORTS OF THINGS. BUT YEAH, THE CONSTRUCTION DID NOT LOOK GOOD ON THE EDGE OF PECAN GROVE AS I DROVE BY YESTERDAY, BECAUSE THERE'S A HUGE AMOUNT OF DEPLOYMENT OF CONSTRUCTION THAT HAPPENED IN THE LAST TWO WEEKS IN THAT AREA. IF YOU HAVEN'T DRIVEN THROUGH THERE. YEAH. OKAY. BACK TO YOU. YES. SO I'M ACTUALLY GOING TO TURN IT OVER TO JENNIFER ARNOLD. SHE'S GOING TO COVER SOME AFFORDABLE HOUSING INITIATIVES. THANK YOU VERY MUCH. ACTUALLY MY SLIDES ARE FAIRLY BRIEF. BUT GIVEN THE

[02:25:01]

[02:30:03]

WE'LL BE DONE BY NOON. IF YOU WISH, BUT WE'LL STAY. I'M FINE. JUST KEEP GOING. LET'S ROLL.

OKAY. I ACCEPT YOUR CHALLENGE, OKAY? I HAVE A FEW BRIEF SLIDES ON ON CIP. YOU KNOW, WE'VE TALKED ABOUT ROADWAYS ALREADY THIS MORNING. SO THAT WAS A BIG PORTION OF IT. SO I WON'T DIG TOO MUCH INTO THIS SLIDE. BUT THIS IS OUR FIVE YEAR CIP. AND YOU CAN SEE THAT IT IS A SUBSTANTIAL AMOUNT OF MONEY. IT'S $2.2 MILLION OVER FIVE YEARS ACROSS ALL OF OUR FUNDS.

AND I SAY MILLION, 2.2 MILLION WOULD BE VERY, VERY SMALL. UNDERWHELMED. YEAH. MY APOLOGIES, BUT THIS DOES SHOW OUR RATE OF PROGRESS IS NOT SLACKENING. AND IT PROVIDES KIND OF OUR OPERATIONAL ROADMAP FOR YEARS TO COME. AS AS I DID MENTION EARLIER, WE DO BUILD OUR LONG TERM, BOTH OUR LONG TERM PLANS OFF OF THE CIP TO MAKE SURE THAT WE CAN FUND OPERATIONALLY WHAT YOU ARE BUILDING TODAY AND THAT WE'RE ALSO TAKING CARE OF EVERYTHING THAT WE NEED TO. ALSO, WE'LL MENTION THAT THIS ISN'T JUST A GENERAL FUND. IT DOESN'T JUST IMPACT THE GENERAL FUND. A LOT OF THIS IS WATER AND WASTEWATER INFRASTRUCTURE. SO AS DAN JACKSON POINTED OUT EARLIER, FOR NEXT FISCAL YEAR, THESE ARE SOME OF THE MAJOR PROJECTS THAT WE DO INTEND TO FUND. I WON'T READ THROUGH ALL OF THEM, BUT THEY DO HIT ALMOST ALL OF OUR FUNDING TYPES, FROM ROADS TO FACILITIES. AND THEN YOU CAN SEE QUITE A BIT THERE IN WASTEWATER, THAT $114 MILLION NUMBER THAT WE HAVE IN THE CIP AND ALL OF THE FUNDED THIS YEAR, BUT THAT IS THE COLLIN COUNTY GRANT THAT DAN JACKSON WAS REFERRING TO EARLIER TODAY. THAT'S WHAT I HAVE ON THE CIP. WE DID TALK ABOUT WATER AND WASTEWATER RATES QUITE A BIT EARLIER. I'M GOING TO LET TREVOR TALK ABOUT THE WATER AND WASTEWATER FUND VERY BRIEFLY, MOSTLY HITTING IT SORT OF SORT OF LIKE WE DID WITH THE DEPARTMENTAL BUDGET ON THE GENERAL FUND SIDE, SHOWING YOU KIND OF WHAT WE EXPECT TO ADD AS FAR AS STAFFING AND SERVICES FOR FISCAL YEAR 26. ALL RIGHT. I WILL MENTION THIS. PROBABLY YOU CAN TELL ARE THE INTERNAL JOKE IS IF YOU WANT TO GET THROUGH SLIDES QUICKLY ON THE PERSON YOU WANT DOING IT. SO HERE'S JUST SOME OF THOSE HIGHLIGHTS OF THAT FUND. WE'VE MENTIONED SEVERAL TIMES THE CONTINUATION OF OUR WATER LINE REPLACEMENT. WE DID A DEBT SALE. IN THIS CURRENT FISCAL YEAR, NEXT YEAR WE ANTICIPATE ANOTHER ONE. AND THEN THERE'S THAT WATER LOSS NUMBER THAT WE DID MENTION ABOUT A DECADE AGO. WE'RE AT 28%. WE ARE DOWN TO ABOUT 7% NOW, WHICH IS EXTREMELY GOOD. AS WE GET DOWN TO THOSE LOWER NUMBERS, IT GETS HARDER AND HARDER TO BRING IT EVEN LOWER THAN THAT. SO WE'RE IN A VERY GOOD SPOT THERE. SOME OF THE NEW ADDITIONS THIS YEAR, I THINK PAUL, IN HIS OPENING SPEECH MENTIONED ABOUT 18 FTES ARE BEING ADDED THERE. THE BULK OF THOSE ARE ABOUT HALF OF THOSE ARE FOR THAT ENI PROGRAM. INFLOW AND INFILTRATION. KIND OF THE GOAL OF THAT IS TO REDUCE OUR WASTEWATER FLOWS THAT WE SEND TO NORTH TEXAS, BECAUSE OBVIOUSLY WE HAVE TO PAY FOR THAT WATER TO BE TREATED. AND AS YOU SAW FROM OUR RATE CONSULTANTS EARLIER, THE BIG BULK OF EVEN OUR WASTEWATER SIDE OF THIS FUND IS OUR PAYMENT TO NORTH TEXAS, WHICH IN THIS UPCOMING YEAR IS ABOUT $41 MILLION FOR WASTEWATER AND WASTEWATER TREATMENT. SO THE GOAL OF THAT PROGRAM THAT WILL BE STARTING IN THIS NEXT FISCAL YEAR IS TO HOPEFULLY START TO REDUCE WHAT WE SEND OVER THERE AND IN TURN, REDUCING OUR COST.

AND THEN THEN JUST SOME OTHER ITEMS I MENTIONED WASTEWATER MAINTENANCE PROGRAM THAT JUST HAS TO DO WITH CONTINUED INSPECTIONS OF THE WASTEWATER LINES, MANHOLE INSPECTIONS, AS

[02:35:06]

ANOTHER CONCRETE PROGRAM HELP WITH WHEN WE DO UTILITY CUTS. THIS IS REPLACING THE CONCRETE.

WHEN WE DO THOSE CUTS, THE WATER DEPARTMENT DOES HANDLE THOSE. AND THEN JUST AGAIN, JUST TO TOUCH REAL QUICKLY ON THE WATER RATES. SO AGAIN MENTIONED EARLIER AGAIN INCREASES IN THE RATES WE PAY FOR BOTH WATER AND WASTEWATER FROM NORTH TEXAS. AND THEN ON THE CITY SIDE AGAIN THAT PASS THROUGH RATES YOU SAW EARLIER. IT'S ABOUT 4% OVER ON THE WATER SIDE AND 5% INCREASE ON WASTEWATER RATES, ALLOWING THIS FUND TO REMAIN SELF-SUFFICIENT GOING FORWARD.

AND THEN ANOTHER ONE OF THESE LOVELY SANKEY DIAGRAMS THAT WE SHOWED EARLIER WITH THE GENERAL FUND, THIS IS THE WATER FUND. AGAIN, YOU CAN SEE HOW THAT TOTAL REVENUE OF ABOUT 175 MILLION DOES FLOW THROUGH TO THE DIFFERENT DEPARTMENTS. YOU KNOW, OUR METER SERVICES DEPARTMENTS, OUR UTILITY BILLING, CUSTOMER OPERATIONS DEPARTMENT AND THEN OUR PUBLIC WORKS SIDE OF IT, THE WATER AND WASTEWATER SIDE. AND THEN KIND OF AS WE SHOWED EARLIER, YOU KNOW, 95 MILLION OF THAT IS PAYMENTS TO NORTH TEXAS FOR WATER PURCHASE AND THEN WASTEWATER. ALL RIGHT. AND THEN TWO OF OUR OTHER ENTERPRISE FUNDS, ALONG WITH THE WATERFRONT, ARE SOLID WASTE AND SURFACE WATER DRAINAGE FUNDS. SO OUR SOLID WASTE FUND, IN CASE YOU DIDN'T KNOW, LAST YEAR WAS OUR FIRST YEAR WITH OUR. SORRY. WELL, THIS CURRENT FISCAL YEAR THAT WE STARTED OCTOBER OF LAST YEAR WITH OUR NEW SOLID WASTE PROVIDER, FRONTIER HEARING, JUST INTERNAL THINGS, ESPECIALLY ON THE PUBLIC WORKS SIDE, SEEMS LIKE THAT HAS BEEN VERY BENEFICIAL TO THE CITY TO SIGN A CONTRACT WITH THEM AND GO WITH THEM AS OUR WASTE PROVIDER. ONE THING WE DID WANT TO SHOW THIS YEAR, WE HAD A RATE CONSULTANT COME IN. SINCE WE WERE SWITCHING PROVIDERS LAST YEAR, WE HAD THEM COME IN AGAIN THIS YEAR TO LOOK AT OUR RATES, ANALYZE THOSE, MAKE SURE WE'RE RECOUPING THE COST OF SERVICE, MAKE SURE YOU KNOW THINGS ARE GETTING TAKEN CARE OF. AND IN THIS UPCOMING BUDGET WE'RE PROPOSING, IT'S A 60 $0.01 INCREASE OVER THE CURRENT RATE, WHICH CURRENTLY IT'S 1975. AND BUMPING THAT TO 2036 FOR RESIDENTIAL CUSTOMERS. THERE'S ALSO VARIOUS COMMERCIAL RATE INCREASES AS WELL THAT ARE PROPOSED. AND THEN A COUPLE OTHER THINGS BEING ADDED. CO COMPLIANCE OFFICER THIS IS TO HANDLE A LOT OF THE DOWNTOWN. WASTE COLLECTION WORK WITH THOSE BUSINESSES DOWN THERE. AND THEN ANOTHER ONE IS A RECYCLING STUDY FOR THE UPCOMING YEAR TO LOOK AT, TO KIND OF DEVELOP A PROGRAM FOR COMMERCIAL MULTIFAMILY RECYCLING. ALL RIGHT. NEXT ARE SURFACE WATER DRAINAGE FUND, WHICH IS ALL FUNDED BY OUR STORMWATER FEES. AGAIN, DAN JACKSON, YOU SAW EARLIER LAST YEAR WHEN HE PRESENTED THE RATE STUDY FOR WATER. AT THAT SAME TIME, HE ALSO DID A SURFACE WATER DRAINAGE STUDY FOR US AS WELL. THAT'S SOMETHING THAT HAD NOT BEEN DONE IN QUITE SOME TIME. WE INCREASED FEES FOR THE FIRST TIME. LAST YEAR IS ABOUT $0.50. IN LINE WITH HIS RATE PLAN. THAT WAS SOMETHING WE HADN'T DONE AS FAR AS INCREASING FEES SINCE 2014. SO ABOUT A DECADE AGO. SO IT WAS TIME FOR RATE STUDY. IT WAS TIME FOR AN UPDATE. SO IN FOLLOWING THE RATE PLAN THAT WAS PRESENTED LAST YEAR, WE'RE LOOKING AT A 75 CENT INCREASE BOTH ON RESIDENTIAL AND COMMERCIAL STORMWATER RATES. I THINK THAT PUTS YOU AT ABOUT FOR RESIDENTIAL ABOUT $4.25. AND THEN THE REASON FOR THIS IS SO THAT HOPEFULLY IN THE FUTURE, IN THE UPCOMING YEARS, AS WE FOLLOW THIS RATE PLAN, THAT FUND CAN FUND CAPITAL DRAINAGE PROJECTS ITSELF, THAT WE CAN FUND THOSE FROM THERE. ALL RIGHT. AND NEXT WE HAVE THE AIRPORT, WHICH I WILL TURN OVER TO BARRY. HEY, TREVOR. YES, SIR. QUESTION FOR YOU ON SLIDE 66. WE'VE GOT A RATE INCREASE FOR RESIDENTIAL OF $0.61. AND THEN THE NEXT LINE SAYS COMMERCIAL RATE INCREASE IS PROPOSED AS WELL. SO WALK ME THROUGH WHAT WHO PROPOSED TO WHO AND WHO MAKES THAT DECISION. AND WHAT IS WHAT ARE THOSE INCREASES LOOK LIKE. SO THEY'RE VARYING INCREASES. WE'LL CERTAINLY PRESENT THOSE KIND OF ALONG WITH WHEN WE BRING OUR FEE AND RATE INCREASES FOR THE YEAR. WHEN WE DO ADOPT THE BUDGET AT THOSE TIME, WE CAN PRESENT THOSE. YEAH, I CAN MAKE SURE THAT WE

[02:40:06]

HOWEVER, WE HAVE A STRATEGY FOR THAT. WE WANTED TO PRESENT TO YOU TODAY, AS WE DO WITH A LOT OF OUR PRESENTATIONS, THE AIRPORT, WE LOOK AT THE AD VALOREM REVENUE BEING COLLECTED FOR THE VARIOUS TAXING ENTITIES. YOU CAN SEE THE MOST RECENT YEAR WAS A DECREASE IN THAT AD VALOREM REVENUES. PART OF THAT IS DUE TO THE DEPRECIATION OF THE AIRCRAFT BASED AT THE AIRPORT. SOME OF THE OTHER REASONS BEHIND THAT ARE FOR THE STOCK OF AIRCRAFT THAT ARE KEPT THERE, WITH ONE OF OUR HANGARS BEING OUT OF COMMISSION THE LAST YEAR, WE DID HAVE SOME RELOCATIONS OF AIRCRAFT, BUT THIS IS SOMETHING WE'LL SHOW EACH YEAR. JUST TO GIVE YOU KIND OF THE UPDATE ON WHERE WE STAND IN FUTURE PRESENTATIONS, WE WILL HAVE A LOT MORE INFORMATION ON THE REVENUES AND EXPENDITURES SPECIFICALLY TO THE TERMINAL ITSELF. CONSTRUCTION UPDATE.

THIS IS A PICTURE THAT WAS ACTUALLY BEFORE OUR GROUNDBREAKING, SO GROUND HAD ALREADY BEEN BROKEN. BUT THE EARTHWORKS MOVING FORWARD AT A GREAT PACE. WE'RE ACTUALLY FASTER THAN WE ANTICIPATED BECAUSE THE WEATHER HAS BEEN COOPERATING WITH US THE LAST MONTH, OPERATING EXPENSES. LIKE I SAID, IT WILL BEGIN INCURRING EXPENSES HERE THIS YEAR AS WE ARE PRE-FUNDING SOME OF THE POSITIONS NECESSARY. SO FOURTH QUARTER OF THE UPCOMING FISCAL YEAR. SO THIS TIME NEXT YEAR WILL BE HIRING NINE DIFFERENT POSITIONS IN PREPARATION FOR THE OPENING OF THE TERMINAL. FIVE OF THOSE ARE TERMINAL AREA DISPATCHERS. SO THERE ARE PEOPLE WHO GET THE REPORTS AND DISPATCH EMPLOYEES TO ISSUES EITHER IN THE TERMINAL OR ON THE AIRFIELD.

SO WE HAVE TO HAVE THOSE POSITIONS FUNDED UP AND TRAINED BEFORE WE OPEN THE DOORS. THEN WE ALSO HAVE TWO OPERATIONS AGENTS, A QC PERSON WHO'S RESPONSIBLE FOR KEEPING CONTROL OF THE QUALITY OF ALL OF THE MEASURABLES THAT WE HAVE TO REPORT AS PART OF OUR 139 CERTIFICATION, WHICH ALLOWS US TO OPERATE COMMERCIAL AIRCRAFT. AND THEN THIS YEAR ALSO, WE ARE GOING TO SEE AN UPTICK IN THE MARKETING EFFORTS. SO BIG STRATEGY AS WE'RE LOOKING HERE, WHAT WE'VE DONE OVER THE LAST SEVERAL YEARS, IF NOT THE LAST, PROBABLY EIGHT YEARS OR SO, WE HAVE TAKEN REVENUES FROM THE OPERATING REVENUES OF THE AIRPORT, FROM THE OPERATING AIRPORT, AIRPORT OPERATING FUND, AND WE TRANSFER LAST YEAR $1.7 MILLION, BUT IT FLUCTUATES A LITTLE BIT YEAR OVER YEAR. WE TRANSFER THOSE DOLLARS TO THE AIRPORT CONSTRUCTION FUND. SO THINGS LIKE CP TEN OR THE CUSTOMS BUILDING OR THE RUNWAY EXTENSION OR THE TAXIWAY RENOVATION PROJECTS, THOSE GET FUNDED OUT OF THE CONSTRUCTION FUND. AND WE'VE BEEN TRANSFERRING 1.7 MILLION OR MORE DOLLARS INTO THAT CONSTRUCTION EVERY YEAR. OUR PROPOSAL, AS WE ARE LOOKING AT THOSE FIRST FOUR YEARS OF OPERATING LOSSES ON THE TERMINAL SIDE, IS TO REDUCE THAT TRANSFER AND KEEP THOSE DOLLARS AS NEEDED IN THE OPERATIONS FUND. IN DOING THIS, OUR GOAL IS TO MAINTAIN AIRPORT EXPENDITURES BEING FUNDED BY AIRPORT REVENUES. SO WHAT YOU'RE GOING TO SEE IS THIS YEAR, YOU'RE SEEING THAT REDUCTION IN THE TRANSFER TO COVER THOSE PEOPLE, AS WELL AS SOME EQUIPMENT AS LISTED ON THE SUPPLEMENTAL LIST. THAT'S AT THE END OF YOUR BUDGET BOOK. AND IN COMING YEARS, WE'LL MAKE SURE THAT WE BALANCE THAT OUT SO THAT WE CAN COVER THOSE EXPENDITURES WITH THOSE FUNDS. EXCUSE ME, MR. MAYOR, I HAVE ONE QUESTION. WHEN YOU TALK ABOUT AIRPORT OPERATIONAL, YOU MADE THE COMMENT ABOUT LOSSES. JUST FOR CLARIFICATION, FOR ME, YOU'RE COMBINING GENERAL AVIATION AND COMMERCIAL. SO WHEN YOU SAY AIRPORT FROM A BUDGETARY

[02:45:03]

AND IN THIS YEAR IN 25, WE'RE PROJECTING ANOTHER 6% INCREASE OVER 25. AND THEN FOR 26, JUST ABOUT $3.4 MILLION. WHAT WE'RE ESTIMATING IN HOTEL TAX REVENUE. AND THEN JUST THERE ON THE SCREEN, OBVIOUSLY, WE CAN ONLY SPEND THIS IN ACCORDANCE WITH STATE LAW. IT'S GOT TO DIRECTLY ENHANCE PROMOTE TOURISM IN THE CONVENTION HOTEL INDUSTRY. AND THEN IT ALSO MUST CLEARLY FIT INTO NINE DIFFERENT STATUTORY CATEGORIES. SO IT CAN ONLY BE SPENT ON SPECIFIC ITEMS. ONE OF THOSE BEING A VISITOR'S BUREAU. VISIT MCKINNEY. SO JUST TO MENTION ON THEIR BUDGET, THEIR OPERATING COSTS UP FROM WHAT WE ADOPTED IN 25, ABOUT 177 GRAND. THEIR MAIN ASSET THIS YEAR WAS A MARKETING PROMOTIONAL PLAN TO BETTER PROMOTE MCKINNEY AS A DESTINATION, ESPECIALLY WITH ALL THE UPCOMING STUFF. WE HAVE THE AIRPORT, YOU GOT VENUE, THE SURF PARK RESORT, SO KIND OF TO START DOING A LITTLE BIT BETTER, PROMOTING THIS PLACE AS A DESTINATION. WITH ALL THOSE NEW PROJECTS COMING ONLINE. SURE. LET'S GO THROUGH THAT. LOOKING FOR WHAT IS THAT? 100 THEREBY YOU WERE GETTING THERE. IT WAS ON THE NEXT, NEXT PAGE FOR THE ACTUAL YOU GOT ACTUAL STATEMENT OVER HERE. YES, SIR. SO YES, THERE'S KIND OF JUST A SNAPSHOT OF THEIR BUDGET. HOTEL FUND TRANSFER, ABOUT 1.7 MILLION OVER THERE. THAT'S TO COVER ALL THEIR PERSONNEL COSTS AND THEN DIFFERENT MARKETING PROMOTIONAL ITEMS LIKE I MENTIONED. AND THEN THEIR STAFFING. THEY'RE NOT CHANGING FROM THIS CURRENT YEAR TO NEXT YEAR. NEXT WE HAVE THE MEDICI. SO OF COURSE, THE MAIN FUNDING SOURCE OF BOTH THEM AND THE CDC IS A SPLIT OF A 1% ON THE SALES TAX FOR THE UPCOMING YEAR. WE ARE ESTIMATING $25.4 MILLION IN SALES TAX REVENUE, JUST LIKE WITH WHERE WE WERE PROJECTING IT AT IN THE GENERAL FUND, 3.5% OVER THE CURRENT YEAR. AND THEN THERE'S JUST SOME OF THE ITEMS OF WHAT THOSE FUNDS CAN BE SPECIFICALLY. SPENT ON. HERE'S JUST, I'M SORRY, CHANGING ON MY COMPUTER WITHOUT THE SCREEN. SO AGAIN, HERE'S A SNAPSHOT OF THAT BUDGET TO SHOW YOU THE REVENUE THEY'RE BRINGING IN THEIR EXPENDITURES. SO ABOUT A $27 MILLION BUDGET FOR NEXT YEAR. THEY DO HAVE TWO NEW STAFFING ADDITIONS IN THE UPCOMING YEAR. A DIRECTOR OF STRATEGY AND OPERATIONS. THEN A SECOND ECONOMIC DEVELOPMENT SPECIALIST. I WILL MENTION SINCE

[02:50:04]

JUST THE SAME THREE STAFF OVER THERE FROM ONE YEAR TO THE NEXT. ANY QUESTIONS? ANY OF THOSE? ONES? NO. OKAY. SO OUR FINAL SLIDE HERE. WE HAVE MADE IT JUST KIND OF AGAIN ANOTHER CALENDAR OF COURSE. EARLIER THIS WEEK ON TUESDAY Y'ALL HAD THAT TAX RATE RECORD VOTE WHERE YOU SET THE CEILING OF THE TAX RATE, WHICH WAS ABOUT 0.413. THE TAX RATE WE'RE PROPOSING HERE IS 4.412.

YOU ALSO SET THE PUBLIC HEARING DATE THERE, WHICH IS THE DATE YOU SEE THERE, WHICH IS SEPTEMBER 2ND. THAT'S WHEN WE'LL BRING FORTH HAVE A PUBLIC HEARING ON THE TAX RATE AS WELL AS THE BUDGET. THAT'S ALSO WHERE THE BUDGET AND TAX RATE WILL BE BROUGHT FOR ADOPTION AS WELL.

AND THEN JUST BEFORE THAT, WE'LL HAVE ANOTHER CITIZEN INPUT MEETING ON THE BUDGET. WE'LL PRESENT THE BUDGET AGAIN, AS WE MENTIONED. WE DID THAT BACK IN MAY. WE'LL DO IT AGAIN HERE ON THE 19TH OF AUGUST TO GIVE CITIZENS ANOTHER CHANCE TO SEE THE BUDGET. SPEAK ON THE BUDGET.

AND WITH THAT, ANY QUESTIONS FOR ANY OF US UP HERE ON ANYTHING WE'VE GONE THROUGH OR ANY COMMENTS? NO QUESTIONS. THANK YOU ALL VERY MUCH, EACH OF YOU, FOR SHARING YOUR EXPERTISE. WE APPRECIATE IT. NEXT STEPS. MR. HOLLOWAY, THE 19TH. WE COME IN. WE HAVE A PUBLIC INPUT ON THE BUDGET. WE'VE GOT SOME NOTES, SOME THINGS THAT WE NEED TO ADDRESS AND GET TO THE COUNCIL.

AND THEN THE BUDGET ADOPTION IS SCHEDULED FOR SEPTEMBER 2ND. I BELIEVE THAT IS A PUBLIC HEARING AND THE BUDGET ADOPTION AS WELL. AND ANY OTHER QUESTIONS YOU MAY HAVE, PLEASE LET US KNOW.

BETWEEN NOW AND, YOU KNOW, ADOPTION, WE'LL BE HAPPY TO. GOT A FULL STAFF HERE. THAT READY TO ANSWER ANY QUESTIONS YOU MIGHT HAVE. THANK YOU. THANK YOU FOR YOUR TIME. WE APPRECIATE IT. DO WE HAVE ANY EXECUTIVE SESSION? OKAY. DO WE NEED A MOTION TO ADJOURN, SIR? LET'S DO THAT. MR. BELLER. MOTION SECOND. MR. LYNCH, IS THERE ANY DISCUSSION?

* This transcript was compiled from uncorrected Closed Captioning.