Work Session

Good evening everyone. We'll begin our May 26 work session. At this time, I'm going to turn it over first to our interim town manager, Russ Overton.

Thank you, Mayor and Council. Um for the agenda tonight, we are going to continue our budget discussion uh in presentation uh that we started at the quarterly meeting. And from that meeting, thanks again to the chiefs who um used a portion of that time to talk about um the heavily focused public safety budget that's [snorts] been recommended to you. Tonight's focus is going to be on cuts and revenues specifically. Um hopefully we'll get through that, but if we do not um we're prepared to continue it on Thursday as well. And if we do happen to get through it, then on Thursday we will also use our time to focus on high performing staff as well as a living wage presentation for you as we just continue the discussion of the budget. Um, so with that and to get started, I'm going to skip over as Jenny and I talked, we'll bring a calendar back to you on Thursday um, so that we can get to our budget discussion tonight and then get to a uh, believe we have close session afterwards. So, we're going to try to also um, just maintain this to an hour if that's possible so that we have plenty of time for the close session.

Okay.

So, with that, I'll turn it over to Stacy.

All right. Thank you very much, Russ. Good evening everyone. Happy to be here to pick up where we left off on May the 14th. Right. All right. So, quick look at the calendar. Lots of checks. We've accomplished a lot of things together since January. And we finally made it to the second slide of dots. Um we're here tonight, May 28th, for the work session. We have another work session on Thursday, and our first budget public hearing is also on Thursday. So, Russ teed this up nicely. We're here to talk this evening about cuts that have been made to this 2027 recommended budget and additional ones that you all could consider. Um we're also going to talk a little bit about potential additional revenue sources andor cost

recovery options. So you are not seeing things uh you're not seeing things. This really does say budget cuts considerations FY2026. That is the current year that we are in. But we wanted to walk you through and remind everyone of some of the steps that went into making this current year budget because that actually really plays an integral role in how we got to the FY2027 recommendation. So going back a year and a half, the 2026 budget instructions provided to staff were minimal to no increases. When you submit your requests, minimal to no increases. Those requests came in, staff worked together, determined that another $27.8 million needed to be reduced from those requests. And that was a combination of things. It was voluntary cuts, mandatory cuts, decisions like not replacing vehicles for the second year in a row. All of that combined together reduced the 26 recommend or uh requested budget by 27.8 million to form the recommendation. So, let's talk about what the current year budget has accomplished. You know, that direction that was given to staff, the cuts that were made. There were reasons for that. The first was that work helped us address our fund balance challenges that we've talked about. Um, that work temporarily for one year eliminated 2 eliminated 29 positions. We've talked about those. I think I stole my own thunder there on the vehicle replacements. It meant we didn't do them for two years in a row. Um it we did look at some departments and divisions and in that work uh eliminated the R&D research and development and community projects groups and so we've started talking about this work that was done to form the current year as kind of the major cleaning of the closet. We went in and we did a lot of work to bring you the recommendation for the budget we're in now. So that does set the stage for FY2027. So the direction that was given to staff

when they were submitting the request for the budget that you all are are considering now was request what is needed. Meaning um you know last year was the major closet cleaning. You may need more resources whether those are personnel or those are supplies whatever the case may be equipment. You know ask for what you need. Get us to a point where you are providing service at a right and appropriate level with what you need. And so those requests came in and again directors looked at the number associated with that. We're like, "All right, we're gonna have to cut something, right? It's it's more than what we think we can move forward with. What do we reduce?" So through that work, directors and the interim town manager worked together to permanently eliminate 32 positions. That's all 29 of the ones that were unfunded the prior year, plus an additional three. Um that group identified another $8 million in operating cuts and then identified 53.3 million in capital cuts which we talked a lot about during the uh the quarterly meeting in met earlier in May. And so internally we've kind of dubbed this second review the second cleaning of the closet, right? And when you do one major cleaning there's often [clears throat] a little less to clean when you come back the next year to do it again. Another complicating factor, we've talked about this when we've talked about property tax revenue, and I I don't want us to lose sight of this, is that [snorts] K's Wake County assessed valuation, the portion of Kerry in Wake County, that valuation decreased for the first time in recent years. So, it decreased, that value decreased by about $200 million. So, that's not an insignificant amount. Right now, overall assessed value is up over actual 2025, but the Wake County piece, the biggest piece of carry decreased.

Could you explain that a little bit? Sorry. like um the individual home value went up but the Wake County so in Kerry the the value went up the the um

assessed value of a home but for the entire Wake County it went down.

Yes. Because we've we've talked a lot recently about the uh charitable housing exemptions and the impacts that those are having on the tax base in all counties locally but particularly heavy in Wake County. that is a significant piece of that decrease. Um the reason the overall assessed value has not decreased when comparing it to our last actual year which is 2025 is because Chadam County is up. Um so that has kind of helped offset that a little bit.

Stacy, I think it's important also to remind that not everybody's values has continued to go up. Tell your story.

Yeah, I did not uh my house did increase in value significantly. we live um very close to the downtown Kerry Park. Um I did not file for a property tax uh relief in any way. I was like, "It is what it is. I'll pay my bill. We're moving on." The assessed value is the assessed value. And I personally got a letter three months ago in the mail um that said, "Hey, your value has decreased by $1,000." And I was like, I don't understand. I did not submit anything. Why did my value decrease? Um, and so I have not been able to get full resolution yet as to why that decrease happened, but my personal property, my home, the value decreased 1,200 bucks.

So the house value even in Kerry,

yes,

has gone down.

Yes.

I some for some magic reason mine did un uninitiated

overall or just in some cases?

I do you have that data?

I don't have that data. And the majority of that 200 million that I'm talking about, it it is directly related to that charitable housing legislation that we've talked about and the exemptions that apartment buildings are managing to um be awarded in the current environment. Um that could change based on

Do we need to explain that for those that are watching what we're talking about? We can I don't have all the ins and outs, but I can give you the very high level explanation, which is there is legislation currently in place that allows a very minimal amount of an LLC

that owns an apartment building to be nonprofit. It could be the tiniest of ownership in a jointly owned investment property. Um, and that tiniest of ownership more than likely qualifies that apartment building. thinking about multif family right now. Um for a very significant um exemption as it is then considered a charitable housing um it's part of the charitable housing tax group tax group. Um so that means that what we could have earned in value at a higher privately held value is now pretty dramatically decreased. And I think I gave you an example a couple work sessions ago and I just can't recall the number, but it was about a 70% decrease I think in value because of that minority ownership which qualified as charitable.

Was that at the quarterly?

I think it was a work session.

Was the work session before?

I think it was I think I was standing here when I did it.

I think [laughter] here

I think there were probably two properties in Kerry that fell into that.

I believe there were about six the last time I checked. Um, it's not like it's 20.

I thought six was like an entire wake, but I could be wrong.

Wake was more.

Yeah, wake was more. Six was Carrie.

Oh, okay. Got it. [snorts]

And and it's important to note we believe that there's probably multiple factors

and we don't we haven't been able to

um break it all down, analyze it in detail to be able to tell you what the factors were. But that's a significant

we just we just know it's really significant for you all to hear the value overall of Kerry property has decreased which seems very unusual at least certainly in my history and I know Russ's as well.

Agreed.

That's unfortunate. Um you said that you know you used multifamily so it's not on mixed use.

It's it's multif family apartments focused

only multif family.

That's my understanding. Is this just from fiscal year 2025 to

2026?

Um, can you give me a little more reference to my understanding?

When did this when did this legislation occur so that this decrease that we're that specifically that piece um happened?

Lisa's got I've caught her midbite, but

it's not new legislation.

No, the legislation was enacted years ago. There was a court case more recently, but still maybe like 10ish years ago. that explained that yes, this was a legitimate thing for property owners to take advantage of and folks just seem to be catching on that this is something they can do. So, it's become much more popular just the past few years.

Okay. Thank you.

So, it's not necessarily that our collectively our home values are going down.

Although mine and yours may be a unique situation [laughter] because I haven't heard of anybody else so far, but I got a letter. But that's a good distinction that it's not like hey your tax bill is probably not going down. It's a part of a bigger a bigger thing. Yes.

But I think like we do revenue neutral when it goes up we reduce the tax so that you know we are kind of balancing it out. In this case it will be in the opposite direction. Isn't that true?

Could be. If um if your scenario were true the whole way and you were never revenue neutral, you'd still need the same amount of revenue to supply the same amount of services.

Therefore, the taxes could go up.

In reality, we are saying taxes go are going up, but you know, when the house assessed value goes down, it's kind of we're balancing that, but we are going probably more than

going revenue neutral. This year we're just highlighting it as a um as we haven't seen it in a recent time.

Um and it's still affected. You said the amount. So it's not an insignificant amount.

Um but we're not raising taxes as a result of a reassessment.

I see.

Correct. Correct.

The Here's the question. So for your thous

your Yeah. Your $1,000 is uh $3 less to carry. $3.40 less to carry,

right?

But do we know how many properties are impacted? Like do we is it enough for us to make a change in what our expected and estimated taxes um will be?

Uh I don't have all of that information. That's not what we have. Um, I do believe that the majority of what is driving this truly is that charitable housing exemption and that's why I keep going back to that's what we're hearing from uh Marcus Kinrade at the county. That is absolutely the biggest factor that they are seeing and what he is advocating strongly with the board. Um, so I do believe that my situation is a weird one. I mean, whatever. Um, it is the legislation in my opinion that is the the largest impact and that's definitely verified by what Marcus is seeing. And Marcus Kenrade, for those who are not familiar, is the tax administrator for Wake County. And he is the person, he and his team provide the assessed value number

for all of the municipalities in Wake County. That is not a number that we as a staff um estimate that is provided to us.

Thank you.

It's really important for people to understand though because if this continues to trend

in this way, then it will impact

That's correct.

Yeah. property owners in the future.

Yeah. Okay. Questions on this slide. Okay. Next up. So, we've talked about how this has been building. These cuts have been happening. We cleaned the closet really big to get to 26. We cleaned it again in 27 and you all have very rightfully asked for what else could be cut, right? Um, that's a big question. And so, what we are hoping today is for some discussion from you all to help us hone in a little bit on that some more. But, but what we have brought forward are some cut amounts. This is focusing on the operating budget that could be considered. Um they do say not recommended under them because they are not included in the recommended budget and is not what was brought forward by

the interim manager and staff but absolutely could be considered. Um you'll see them here. I won't necessarily read them all. Um they total about two and a half millionish dollars I believe. We can talk about any of them of interest to you and there may be others. Um so if there are any on this list that you would like additional insight into we can absolutely dig into those and you are welcome to discuss others as well.

These are uh some of which you've brought forward in discussions but also these amounts are the total amounts. So

and we have an additional slide that's going to come after this that's going to focus on capital. So this is not all the cuts we're bringing forward. This is just kind of the first first slide focused solely at operating items that we identified. Then we'll talk a little bit about capital and how that impacts operating. Why does it say not recommended?

Yeah, say it. Say it again.

It says not recommended because these are choices that could be made. They were not made by staff. Staff recommended funding all of them. So, um, for example, I'll give you an example. Uh, this $375,000 for the Chamber of Commerce contract would mean that is the entire contract with the Chamber of Commerce. So, there is a lot more thought that needs to go into that cut. do we want to pull that funding and then that changes our entire relationship with that team that provides us some economic development support. Um [clears throat] so that is why we wanted to designate it clearly to say it's not recommended. We could do it. We could do it. So the available for midyear funding is

more like poss it's here are some possible things you could cut but we're not recommending you cut them.

Correct.

Correct. that are

somewhat larger ticket items in the grand scheme of things.

But you're not recommending that we don't cut them. You're neutral. Is that correct?

I think you should have a discussion.

It's a conversation for you all to have. I look at it as it's not in the binder.

It's not in the

It's not in the binder.

I mean, I'm sorry.

It is in the binder.

In the binder, and we're not We didn't take it out. So,

you haven't torn that page out.

Yes. But you could if you chose. So

instead of um you giving us three options, you're presenting options where we can probably think deeper

and say let's remove this or pause this for couple of years

or one year or remove it,

right? It really just one year focused for now.

And I have some additional to share in a minute, but this doesn't have to be in the entirety either.

Correct.

Just so I understand because you're teeing all these up, I'm guessing for future conversation. Is that right? So we'll be able to or do you want us to talk about these now or do you want to get through your presentation and then we

I will leave that to Russ but I we are very much interested in discussion today. Yeah, that these like you said this is operating so if you want to see the um capital can't have a full conversation

feel free it's however you want to talk about it we have 40 minutes

well I I've got all kinds of thoughts

I have so many thought yeah that was the reason there's no wrong way to go about it

is when do we talk well I think many of us have shared or discussed

um the idea of reducing the contracted videos

um publicly. I don't know um the expenses associated with these and what the pros and cons are about with regard to them. I don't want to say you know kill the whole contracted videos number without understanding that if we were to bring that in house there would still be some sort of cost whether it's capital or operating associated with it. I would just put out there that I'd like to investigate other opportunities with some of these line items, specifically the contracted videos. Um, obviously the Chamber of Commerce contract and what that statement of work looks like. Um, it's been a long time since we did a website overhaul and I think we've all complained about the website enough, but

those were the two that pop up for me.

Okay, that's great. I think what I I want to also know is that chamber of commerce contract. We do a lot of sponsorships with them too for every event and how much like is the total amount and you know can we talk to them and renegotiate some of those things and

stuff like that.

And these are total amounts and I think y'all are both spot on. All we need tonight to know is which ones do you may may wish to investigate further and then whether it's Thursday or the following work session is to bring that back to you over the course of the next couple

want to know what is contracted festivals

that's the list of festivals that we pay Stacy can break it down a little bit

yeah there are four and I don't have my prompt in front of me so this I got to think about what they are um but it's SAS Taste of China uh and

Fest in the West

Fest in the West that's it um those three combined mind. Uh they are contracted. We have contracts between the town and between that I'll say festival vendor. That's not the right word, but I'll go with that. Festival group.

Um and together all of those total $185,000.

Just those three that we give cash to.

Could you tell me again D of China?

I may have missed one. I can check my notes. But it's um

the list is much longer. Does that mean that they're nonind services versus cash?

Okay. Are you thinking of this page too, Lori?

Yeah.

Yes.

Oh, yes. That page.

That page.

But so in that 185 on this list is SAS

infested in the West and Asia Fest.

Yes. I've seen it, Stacey.

Taste of China.

Taste of China. And so those receive cash.

Correct.

And the rest are inind.

But I got Hams Diwali also gets significant $25,000.

I believe they get that through our nonprofit through our grant process for cultural arts. So that is a a separate um yes a separate source of funding for some groups. Um but these are these are large events that have a specific

contract for a cash payment in of support between the town and that that festival vendor for lack of a better word.

So so my comments the given a little history uh we went to war with the Chamber of Commerce many years ago and that was devastating for everybody. [snorts] I'd caution very seriously caution do not harm the Chamber of Commerce. They're they've helped us go they've helped us go international. They've helped bring business to Kerry. [snorts] They are vital part of our economic success and if we ruin that relationship with the chamber, I think we're in trouble. So, I would be very very careful uh doing that. However, I am interested in the and I'm just giving my opinion. We are I'm interested in the contracted videos uh exactly for the reasons you said. Um I want to know the pros and cons because I I fear at one time we did do them in-house and we actually save money by contracting them. Uh so I want to make sure we don't hurt that. And then the festivals we talked about not only you're you're talking about the cash ones but there and this is a later discussion but there's this huge list that requires

police and fire support and EMS that we need to go through and find a way to reduce that list or combined.

I'm so glad you said that because that's exactly where my thought process was. I spoke to the chief over the weekend and I did agree like I'm sorry to cut you but that I got excited and I like somebody else is also thinking

so we're so fire and police focused in this budget and we're not addressing some of the things that really harm them and that is all these festivals we have and there was a what was it two pages? Yeah.

Yes. Multiple pages

and so we need to figure out a way to combine them. I don't want to cut any group that wants to have.

So I think uh what chief also suggested when I spoke to him oneon one was more

about one council like decide what is the primary focus and the you know scope of the services that we want to provide to some festivals and others can hire the officers as and when they they're needed.

Exactly. Um, so that that's you you've been saying this story about the revenue generation and whatnot. That's not a revenue generation for us, but that helps our police officers get

economic. Yeah. And it does have an economic impact. I think what I think I'm hearing and I would love to hear from other folks too is we'd like to know a little bit more about the pros, the cons, the upsides and down and what is possible with these numbers. you know, maybe, you know, we still need to have a certain amount in the contract ated festivals so we can do a couple or maybe maybe we move to a uh a model that's not cash,

right? That's maybe advanced services or providing [snorts] services.

So, I think I think it warrants more information so that we can collectively talk about it.

You look like you're gonna say something, Chris. I see the the festivals a lot more simplistically. I think we need to apply a uniform lessening of what we're giving in support across the board including um any of the you know non-cash support like public works. reduce it for everybody pretty uniformly and um also introduce minimum expectations so that if they want to have a festival, here's what we expect you to provide to make sure they're still safe, there's still everything that's necessary so that the the festivals are the [clears throat] the burden is less shouldered by the town and apply it really uniformly. I just had lunch recently with one of the festival organizers and said, "Hey, I I'm going to introduce this just so you know what would that do?" And he's like, "Oh, we'll be okay." you know, they understand that it can't be um quite so

fully funded. That the tax dollars, I think, are an important part of the festivals because, let's be honest, everybody has a handful of of these events they really like. Um but if they are viable, they should be able to be viable based on vendor, you know, payments and the organizations themselves and and such. And if they're not, then perhaps a festival of that magnitude isn't warranted.

I 100% back that because that's exactly the direction that we need to be given the way the town is growing. Yeah.

And you know, it's not it's unfair to be taking one person's side versus we shouldn't be taking sides. Everybody should be able to and what you said is right. Provide guidelines. You know, this much police officers are needed and you have to pay for this. So

yeah. And and I don't see it as picking sides. There are some uh events I think that we have that are very um well attended and fan favorites. There's others that are very uh low attendance. Yeah.

And cutting support entirely for those that are extremely low attendance. I think it's just good good money management. I see a lot of head

nod. I totally agree. I don't know if my mic here is at the right level. There you go. Um, yeah, I I think we just maybe haven't had a lot of strategy that we've been inclusive to a default that we've said yes, where there's a will, there's a way, we'll make your festival happen for you. And that's just not the environment we're in anymore. you know, because thank you Stacy for helping us understand some of this because I was trying to square this list of recognized events for those following along page 62 uh with our general nonprofit funding because we know that many of these events have a named sponsor

and that nonprofit didn't appear in the nonprofit list and so I was trying to reconcile the two and you know the the nonprofit funding we have our little statuto language here that we devote a

dollar per person of population. And so I mean that feels like that is really thoughtful. We've said this is our cap. These are our dollars that we devote to this purpose. And I would be curious to know a little bit more about how these nonprofits are identified if this is a an application process. It is. Yes. Yes. I assumed so.

And council doesn't weigh in on it. They have a rubric.

Yes,

but it doesn't seem we apply the same logic to festivals. And it seems like that would make a lot of sense to me that, you know, we might cap it at a dollar amount. We might have an application process. Um, you know, that we can uh uh equalize across the calendar. Um, and

that's a thoughtful approach.

And yeah, just just get a little more strategic with how we're funding these events.

That's an excellent point. There's an in a direct cost and there's an indirect cost and we have to evaluate both aspects to see because I feel like indirect cost is so significant that the amount of time our police officers our firefighters EMS they're spending during the festival um that is our um inind yeah

service that we are providing to these festivals and um if we kind of start managing that through strategy and policy we might free up some of the officers from being overworked which is a prime concern right now.

Yeah. And at that quarterly so sorry Michelle at the quarterly we even mentioned starting to charge essentially is asking to offset these expenses to even offset the inind expenses and there are times where multiple of these festivals that we provide something for happen at the same time. So no they're already stretched thin but you know somebody mentioned endal also but um you know we're we're funding or

providing some kind of inind for multiple things that we can't even attend

because I mean there there was recently where there were three things on one day and it was kind of like which one are you going to

because [laughter] I can't I can't be in three places but I'd love to if if we're fun

I [laughter] think we were racing from one to one I think all

like overlapping

best in the west day.

Yeah.

I'd say I think council member Richards um you said it well. I don't as I've talked to you about festivals a little bit is I don't think you use the word environment. We've not been in a budgetary environment where you've had to think about it in this way. [laughter]

Um so the one thing that I'd say if that's what you're interested in is that um we could probably look at and um council member K Johnson had said um see what they cost. I think you'd have to give us a little bit of time. It's not a doesn't have to be part of this budget discussion to be able to do that.

What really impacts the budget is um the amount of cash that that we give folks. So, we can give you a little more information about this

u as part of the budget process and then come back to you and um take a larger look at festivals if that would be okay outside of the budget process.

Of course, for me, I think there's probably 15 or 20 cost centers that we're going to look at at as group. We don't have the time to dive deep into every one of them and look at every scope of work and attendance and all of that. That's why I believe a uniform trim

um in a lot of these situations, not all of them, but I think a uniform trim is going to be

um just the fair and responsible approach there. I think

talking as a body, you know, what percentage should we cut our

festivals budget for example, that is achievable. digging in festival or by festival. I I just don't

point in the time.

We just need a policy.

Sure, that's fine.

Okay, more questions on this slide.

Capital can you just say on midyear appropriations just since that's something that you've used to if you were to cut that, you could still consider anything. It would likely just

be uh general fund transfer potentially

during midyear.

You could still do midyear. It would be a different level of conversation that probably you've been used to the past couple of years.

That's that was my other question. Can you dumb down for me what happens when we need to work on a on a crosswalk?

So, can I jump in? Yeah.

So, years ago, it was very political to do a mid-year appropriation. That would draw the media attention. Oh, they basically can't handle their budget. And to do this, they're going to do a mid-year appropriation. That's kind of how it looked like. You can't do budgets. Yeah. And so to be flexible and to handle things that come during the year because in 12 months things change. Sean proposed that we have this million dollars and every quarter do a finance update and you can appropriate some of that money and if the year goes by and you don't you put it back in the reserves.

Yeah.

And that was a great idea. And so we don't have to go through that political part that draws everybody's attention when in fact we're budgeting flexibility into our budget. So that was the whole intention.

But we always have a public hearing and we vote on it publicly, right?

Or often times we do.

You've had typically my recollection is you've had a vote on it

and whether it was quarterly or more recently as we did surveys and

other expend parking lot expend.

Yes. Yes. I let me ask that another way. We always know when part of that that mid-year funding bucket is used. That is not something that's done without council knowledge. Correct.

It's reported in the quarterly report.

Whatever the next quarter is that tell us what's left

and it's a motion that we pass at the quarterly.

We've also started adding it this year. I don't remember when. January, February probably um to staff reports if there is a use of that money. um you when you appropriated money midy year for additional um audit review the womal bon dickinson work if you remember that in the merit pay remember the staff reports we're now including the table when you

do appropriate from that million dollars we're showing you then and then we're telling you again in the quarterly report

I feel like we were consistently told how that money was if and when it was used but now we're getting it in a very organized

but also amending the budget is required to be if if you amend the budget or you move money transfer money from one place to another. That's also required to be um uh reported to council either in the quarterly even though it might not have been in the past. It's supposed to be recorded

depending on the funds

there there are specific uh points at which that has to happen. Not every movement requires that. But if you're going between funds or between functions, yes. Um the difference would be if this were not funded and something popped up mid year that you needed to address, you would see a staff report that would appropriate the money midyear and you would vote at that time from fund balance and

most likely.

And if another thing I'll point out, if we made a decision in the past at the quarterly, I think it went on the consent agenda at the following meeting. So we' have two shots at it. Is that correct? I'm trying to remember. memory. I'd have to go back and find

Yeah, my memory is we did that back in about 22.

Um, but that kind of fell off too. But also, you didn't spend it several years.

It was also higher. Uh, I think a larger amount when it started, the practice started.

Okay. Go. No, you go ahead.

The contracted videos, I've been wondering, are those all in different pockets of the budget? Is it marketing?

You want to answer?

We have one um enterprise contract with digital P that's managed out of the manager's office, but it includes videos that are produced in in any department. For example, we do some videos on our minority and business and women's program that comes out of the finance department. That's one of Denanisha's

projects. We might do video. Uh the parks and recreation department might need a video for something. So we manage the contract so we know your your carry matters or um how much it costs us to do a the planning and zoning board meetings. So we have one contract, one list for all of them uh that we do with digital P.

So that budget is from the manager's office. The budgets.

Yes. The contract is managed out of the manager's office. Yes.

So that line item is part of the manager's office budget

or marketing.

Well, marketing's in the manager's office,

right?

Bucket is one of there's what a bunch of divisions under the manager's office. Where's

There are a bunch, but there didn't used to be as many. Did I read that right?

There did not used to be as many.

Okay. No, marketing used to be in IT.

That's true. for example, before that it was in parks and recreation. So the digital peak contract is in the marketing budget.

Okay.

I also want to say that not every video or everything that we're doing with digital P sounds like it's not important like the streaming of this meeting. Is that correct that it's um being facilitated by digital P? Some aspects of it are being done by our special events team and other aspects of it are done by digital P

and this

digital for example though digital P does your council meetings. So when you say you they do your council meeting, that means that they air.

That means that they sit in the control room, they press the buttons, they turn the lights on, they control your microphones, they record it, they put it back on the YouTube channel, they do all of the engineering and production for the council meetings. So uh the contracted videos I see there are two um like one is for the internal

communication and one part will be the external with the residence. So it's more like communication function and for the internal ones it's so um that's kind of because what I feel is some videos might be in need some videos might be like we want so if we want to spend every dollar wisely I would prefer to spend all the videos on more communication with the residents so they could benefit and that Uh, and the funding is also from their tax dollars. So, I I'll support some videos, but we just need to justify what kind of videos we need. Right.

And for tonight, I think um you all it sound like you're on the same page with wanting to see more information about that item.

I'd like to see more about marketing in general. That's just an area that we don't talk about as much. And the number that I see here, I just need to be able to

understand more tonight. But what number are you referring to?

The marketing budget.

The total marketing budget.

Okay.

I think for me, Russ um and maybe this is not a conversation for today, but maybe in 3x4. I want to understand more about manager's office budget a little bit more because I don't know where I was looking at this but the trend is going upwards and I see that the budget has gone bigger and bigger um so some information would be helpful

but I think it's smaller in this year's budget correct overall

yes this year

so I um I have a since we're talking broad topics we're talking about marketing we're talking about these specific ones Um, I also have concerns about how the budget document reads. For instance, since you brought up the marketing budget, there was a 78% increase from last year's

um, sorry, from last year's estimated dollars spent to the recommended budget for the next year, but no significant level increase is identified. So, I'm having a hard time understanding and and that's on a lot of these pages where where every time I see that the budget increased, you know, significantly, I don't understand. And it it may absolutely be valuable and and understood, but I don't see what the new what the update is that you're associating with. What is the why associated? So for instance the PRCR went up 49%. You know the um transportation went up sports venues went up a lot of them went up you know multiple you know and not just a little quite a bit 90% on one 80% but then there's no detail to tell me why it might be absolutely fine I just don't understand the why associated with it. I totally agree. That was the one thing as I've been sifting through this tremendous document that reflects a lot of hard work, but I was doing a lot of math. I had to sit with each page with my calculator because I would love to see that delta listed for us. Yep. Between 26 uh approved and 27 recommended so that we could see the plus or minus there. And then yeah, for me even just like a rough bullet to explain the delta would be so help helpful. It could be this is the 5% merit and this is just salary and so that's the variance there or uh you know something to help explain. Yes, an extra column that actually has the percent change would save us from doing the math [laughter]

or looking at the number cuz Raleigh does that on their budget. It and then

it's really helpful to see, okay, look, I understand. And then also the alignment with what they want to accomplish. The initiatives don't actually

um call out why this number is so much bigger. It might be absolutely um well documented, but I can't figure out what it is. No, this is great feedback.

In some of these categories, it a lot of them it says significant service level changes.

Yeah.

And if it will if it says none, it almost always looks similar to last year, but in the times where there's a lot listed there, you'll often see a the number change, right?

And but for marketing, for example, there's nothing listed that says um service level changes. So, which is maybe highlight it and flag it to say,

okay, are there significant levels or was it just accidentally left off of the page?

Well, it's great feedback. Um, especially since we said it, you know, it's probably going to be a little bit of a multi-year effort. Yeah.

As we shared with you some of the slides from uh budgets from like 13 years ago.

Yeah.

Um to to get to a place where we can provide more information. So, I think all the feedback's great,

but overall, I'm so happy. I was showing my husband the binders from the last two years versus this.

You've got a lot of tabs in there. [laughter]

Yes.

But it's really valuable information. Like it's been super helpful.

I had to pivot to the digital copy. This was completely unmanageable for me.

That's fine. F all day long. Me and Harold, we

I use both

OG keyboard shortcuts here. And I'm also really pleased to see I'm not the only one that had to get out my calculator. Yeah, like [laughter]

I really did. I really did. Um

I know this is beyond the scope of the conversation, but I'm going to be very curious to hear about sports venue administration because that was

97%.

Yeah, that was a huge variance. Yeah.

One other idea I wanted to introduce when we're not talking about capital in

particular is what I'd like to understand in some of these part for example website overhaul where it makes sense um to cons to consider bringing those inhouse. I know there are financial variance like it's not just we could pay somebody $100,000 a year to do a the website and save a half million. I know it's not that simple. I know there's there's benefits and there's pension and there's a million and in the expensive hiring somebody I know there's a lot more to it but in situations particularly with services and with this kind of stuff I'd really like to understand when we do outsource to digital P for example is that simply um is that cost savings or is that uh we it would be three people we'd have to hire to equal the skill set the engineering expertise that kind of thing what I'd like to understand and I believe we had a web master years ago and it probably didn't go.

You have a web you have a web master now.

We do.

That is to get new software like a whole new CMS.

Oh, the whole enchilada.

A whole enchilada which Lori remembers we did in like 2015 2016. Long time.

So that's that's enchilada.

That's that's the whole and that was on um the ISAB at that time and we were um giving a lot of we'll call it very constructive feedback because we all had different ideas and opinions. It was an idea fest, but it was also an opinion fest as I recall.

No, it's good. It's good.

That being said, often times I have these conversations all the time with people. They're like, why don't you just hire somebody to do that? I'll do that for 30 grand.

That that kind of thing. So, I think just exploring in bullets like here's approximately give me a wide range. I don't care what it would cost to bring this inhouse when we do these contracts. um would help us understand and and and folks that are paying attention understand why uh we contract externally for particularly for services where at a glance it seems like it would be uh more inexpensive to bring it in house. Now

with the with the video just a little history on that one and we'll have all the detail for you for your next discussion. Um when we started the channel, which you know from the quarterly meeting we started in 1998, um we in we in did $100,000 in a capital investment because we had to build a studio in the council chambers, old council chambers, but it was more cost effective to contract out the operations of it and the maintenance of it because all we did was a council meeting,

right? So it was we were totally contract for that. But then as time went on we the council wanted to add P&Z and then zoning board of adjustment and then there was carry matters. Then it became more cost-effective to bring that all of that inhouse. So we stopped contracting kept it inhouse and then we started adding more videos and you know the program got moved around and so now

so which year is that? So now we're totally totally contracted without anyone in house. So it it does that and we'll be able to we'll be able to bring all that for you.

It's kind of like festivals.

I think one thing I want to kind of throw this in the conversation, not necessarily from a point of view that we have to make a decision tonight, but I know some of you kind of are also thinking on the same lines, but at some point we have to start thinking about now Carrie's growing. What is the standard that we want to maintain? [snorts] And what is the threshold and how much are we spending on every project and how do we make sure that you know we are using every penny very thoughtfully

especially if it's a capital project and you need um millions of dollars you know for for a one-time expenditure.

Yeah.

Which is a little different than the operating which is ongoing

and and I don't know what state legislative contract means. lobbyist.

Lobbyist.

Lobbyist. That's right. Of course. That's what

one last kind of overarching comment is um I would love us to consider um evolving from this terminology of marketing which is generally one way to more communication which is more two-way back and forth with our citizens. Community engagement, communications, the the marketing that we've done, I get it. It's gotten us economic development and all kinds of things, but I really think of talking with our citizens isn't marketing. It's communications. It's 311. It's collaboration. I would just I don't think I would like our citizens to be thinking we're marketing to them. We're we're not. We're communicating with them. So, I'd really like to us to maybe shift in the philosophy of how we talk about that because I really think that that could help us also slowly rebuild trust with the citizenry.

I think you're spot on and I Susan could add more. I'm sure there's probably lots of feelings as well because the shift incurred marketing was not communications. Communications was whittleled away. Sean destroyed the communications department and he replaced it with marketing and 311 and those were the words we were told to use

and to have a communications department to be able to do that and there is a communications um director position which would be helpful and I I love your idea to have more of that conversation

that's an open wreck now or it's in this recommended

it's in the budget as a position

and I watch online the video that the highest view is Loris riding a bicycle in the greenway Okay. [laughter] That's really people want to see. Yeah.

Yeah. Yeah.

Really?

Yeah. I checked that.

All right.

Do you want to see capital?

Yeah. We can show you a similar slide related to capital if we're ready to go there.

Yeah.

Okay. So, this is a little smaller. I apologize for that, but we're trying to kind of get it on one screen. So, what

you're looking at are um these are general capital projects that are 100% funded in the recommended budget with general fund transfer. So, you may be asking, how does this affect my operating budget? How does this affect my tax rate? This is $10.5 million at the top, 10,576 of projects that are using money that's coming from the general fund. A little bit of fund balance, some of that is general fund revenue, right? That's supporting these. So, if we were to reduce or remove any of these, we are taking some pressure off of the tax rate. That's the tie between these things. Now, what you're going to see on here, or what you do see on here are, and again, these are things that are just funded. A couple of things we did not include because they're replacement equipment that must be replaced. So, you won't see those here if you go back and look at your budget book, but these are things where there is choice that could happen. What I want to make sure we all understand and see and it does say not recommended again staff these things are all funded in the recommended budget but if you want to consider things that it could impact the general fund reducing or removing some of these things could make that movement what I want to make sure we're all clear on we see is there's a whole section that has housing right here those things equal $1.825 $825 million. That is part of the decision that you all made uh a couple of weeks ago since dates are not my thing today um about a penny toward housing. And so I just want to be very abundantly clear that like this isn't saying cut it. In fact, it's saying like not recommended, but it's available to be considered. Um as we work from top to bottom, you'll notice a lot of the majority of these, not a lot, the majority of these are maintenance. This is like maintaining park facilities, general maintenance on this building and other building like the town hall building. General maintenance maintenance on fire buildings, right? Um general maintenance at Cocoa Booth. Uh the development item that you see, I want to make sure we highlight that one because that is a development fee payment that would be related to I won't get the Alustin right, but it's an

Alustin project that you all are going to see on Thursday. I think it's yards.

Yes.

Um to get the Alustin's right. Um, right. So, could you choose not to fund that? You could. We could. Um, but this is where the general fund money is going to support the majority of uh that capital transfer.

You you said something interesting when you were talking about it. You said money is coming from the general fund and some fund balance.

Yeah. If you look I won't get the page number right, but if you pull your general fund summary document open, I don't remember the page number. Um, if I walk out of my box, I can look at somebody's box and tell you where.

May I borrow your book, Michelle? They were looking earlier.

I should know the page number by now because I keep asking about my little box.

567.

And as they look for the page number, just a reminder about time. It's 621.

Page 58 looks like upside down.

Yes.

Okay. Um, once you're on page 58, you can see a U.

Do you want to turn it around?

No, we're we're good. You can see there's a total where it says capital transfers out and in. There's $16.2 million worth of transfers to capital

from the fund balance

from well it's from the general fund. So looking right let me help you get there. Hold on. Working upside down. It's not my strong right here. 162.

Okay. And when we look at the general fund overall 58 oh sorry

that is coming from

Oh it's in your recommended budget which is not in your book. But I can show you on Lor's.

So I see the beginning fund balance is at 142. The ending fund balance is at 136.

Yes. And what we're honing in on is

is the 16.

That's the general fund. That's the total amount. You remember I told you just a second ago that that 105 is most of that. There were some things like um some equipment in the fire department. I think they're radios. They must be replaced. They're not on this list. we

really don't have a lot of choice there. Um, so there were a few things that are not on this 105, but this 105 is a subset of the 162 um, that's showing on your general fund summary.

So your general go

which is page 58.

Your general fund balance reserve is supposed to be set at 33.3%

of total expenditures and debt service.

After if this budget recommended budget were approved, where is it sitting?

It's at the bottom of that page. Yes. 13%.

Which is

is above the 33 because the 33% is 103 million.

We had a prior slide on that as well. So

and I it's 33 million more than we need

above policy.

Above policy.

So why aren't we using that instead of

this is a great Michelle?

That's exactly where I was.

Michelle, that's what we were meeting about. I'm going to look like I was late.

Michelle may want to answer it. That's exactly Michelle does not want to answer.

This is my secret. Michelle needs to hear it three more times before [laughter] I

Well, I'm going to be consistent because Dana gave a wonderful answer to Michelle and I want to make sure you all hear what Michelle heard.

Yep. So, the first thing is it is very important to note that is just a projection. So, it is not accurate to say that that is what the fund balance is.

Very very important. Now, we do projections as a best effort to um estimate where things are are at at the end of the year. And so, we gave you our best estimate based on the information that we had available at the time. But it but it truly is not actual fund balance. You will not know that until the year is done. In fact, typically, you know, you get it in November or December. we get a pretty good hint in September, October because our last receipts of revenues come in in in September. So that's a very important

thing. And then um the second part of that is that um you all need to have a session to talk about fund balance.

Oh yeah. And um and so and the reason why is because the current fund balance policy is what you all have decided to measure yourself against. We know that um S&P is measuring us differently. We also know that the local government commission this year made comments based on a third measure, a third type of fund balance. And so our we believe that this is a whole session that you should spend to get into the detail of it so that you can make your decision and at that point if you wanted to do mid-year allocations to things um based on whatever decision you make with a fund balance that would be very appropriate. But my question is even if I look at the last quarterly which estimates that we're going to end the fiscal year at 125 million of with fund balance with our projection originally at 96 million for 33 and a3%. We could use 10.8 million to reduce or I'm assuming we could use 10.8 million of that to reduce the tax rate 2 cents. I think correct. I think it depends on your risk tolerance.

Yes.

Um so so essentially what you are saying is we trust that the estimates you've given us are going to um bear out. And then secondarily we trust that we know enough about um the different ways of measuring um fund balance that we're willing to take that risk. So that it really is it really is a risk tolerance decision on your part.

And Dana, when you say we know enough, you mean risking AAA bond rating, risking local government commission. That's what you mean by risk. Correct. But yeah, so your own policy is actually the least punitive

of the um of the things that that can come back um on you.

But we choose to lower the fund balance policy. which would take a a bit of time, but certainly we would still even if we used 10.8 million, we'd still be 15 million more

than 96 million if the projections are right. We'd still have a buffer of 3 cents still in our savings account. you I think it's it's important for your for all of you to know that the finance staff and the management team had been trying to get in front of you with fund balance discussions for way more than a year.

So the word you want to talk about it, we want to talk about it. We think that there are ways that that it can be adjusted. Um, I don't think you're prepared to have that conversation tonight, but we are all we are with you 100% for wanting to do that. And the reason I ask is I I very much appreciate the transmitter letter and your um comments about smoothing and and what rate smoothing means and how we've used it so successfully with the utility fund and how everybody wants a predictability with their increase. And inflation has been so hard on so many that a 10% increase in taxes this year after obviously a a 4.79 which was last year, but even a much larger one the year before. 10% to me isn't aligned with the term smoothing. 5% to me seems more like smoothing. 10% is the increase I'm

seeing when I buy milk and eggs and

agree

sort of thing. So I think I will only speak for me. I would rather have closer, you know, 15 million in the bank rather than 25 million in the bank and help the residents who are suffering and have closer to a 5% tax rate increase rather than a 10%. Well, that's just

Well, let's also make sure it's grounded in that money is

uh very good for a one time use.

Probably gets to

uh Stacy's intro to some degree about ongoing operating expenses.

You could use that for one time use, but you've got to refill your savings account,

right?

Understood.

I think a secondary point, if I can tack on to that, Russ, is the fact that um we're going to have to do another budget next year, right? We're going to start probably in July. Um, and there so everybody's excited. I know. Um, and there are more capital projects there, right? There are things are funding this year that need more. There's more maintenance next year. And so having access to that fund balance, having that funding there and letting it roll from one next doesn't hurt either when you're thinking about your your near-term five-year planning window. There is absolutely to your point, Lori, there is a balance between there's a

is it an art it is an art and a science to get to the right amount of fund balance, right? It's both.

I get it. Um, but there are many good attributes for why it's okay for a year to have a little bit more. Completely understand the perspective that you're bringing forward.

Some communities use it if you think of it as how might you want to fund a community center? Do you want to save some money to do it over time? Do you want to do a bond referendum? You know, debt finance it somehow. There's many different ways that this council hasn't had that conversation yet. That's exactly what where my brain just was wanting to protect some of this fund that we're considering using. So doing a combination of exactly what Lori just des Council member Bush exactly what she just described, but really looking to trim a half a cent or a cent through

reconsidering some some budget items. I I believe I appreciate um the thought and time that went into these lists, but I think there's other places where if we discuss as a body where we want to save I think, you know, I've I've taken a trying to take a look at what we're spending on software, for example, had a really great conversation with a with a citizen and resident on that. Um, I think there's other places where we can instead of looking at the housing um the housing monies that we I think there's a lot of support for those monies on this council that I don't believe is the place to look to to shave that half cent or cent off of the recommended budget. I think there's there's other places that we probably collectively um have a different perspective on than than previous councils.

Does that make sense?

Yeah. And Russ, I know our agendas are really tight between now and budget adoption, including tonight, because here we are at 6:31. Uh, I wonder if we could find some time, even if it has to be in our 3x4s, to have this conversation about fund balance, not meaning changing policy, understanding that's something we need to have a longer conversation about for fiscal year 28, but just what uh Lori has proposed about how we use the projected dollars this year. um and taking a deeper dive on that as we've run out of time to do it tonight.

Right. And there's obviously with that, not making you do it tonight, but a math exercise to get to a tax rate or a decrease or anything else that you know where we want to get to the adopted budget.

Yeah, I agree.

Yeah. My my point isn't that there's um there are lots of ways to trim and cut and, you know, tighten our waist. What I really want to make sure is that we when we say we want to rate smooth, when we say we want to help our residents, that

we think about how it affects us. And I know that when I see a 10% increase in something, that doesn't seem like a small increase. 5% is hard enough. I mean,

some somebody told me yesterday he built his car and it was, you know, over $100.

That's right.

And everybody's feeling it. and other municipalities are also trimming as well. And I don't think now's the time to do a 10% um tax rate increase.

I kind of agree with Lori uh Mayor Brutam Bush. [laughter]

Lori,

um I also think I'm just going to say it. Every time that we are staring at the clock in a work session like this when there is no meeting after [snorts] this, I want to be mindful of the staff's time. But we have a lot of kind of complex work to do. And when we're not time constrained with a council meeting afterwards, if we could consider some way to make some of these these work sessions less time constrained, I think that would be helpful because we keep not getting to everything. And at some point we just got to sit here and hammer it out. I feel like we start a lot of discussions to to you know, how many times Susan have we brought up the fund balance and we never get there. um even if we put it on a work session agenda, we're going to run out of time and not discuss it if we don't start sort of sticking it sticking it out until the work is done. So, I just want to share that perspective. I always I get all riled up and by the time I'm like, "Yeah, let's make some decisions." We're like, "Oh, we got to go."

And I completely understand why. And I am not trying to keep staff here till midnight very often. [laughter]

We have a reason tonight. It's costing us money every minute we wake. So,

yeah. And the feedback you've given is incredibly helpful. It's great. Truly, this conversation has been very helpful.

It's great.

Feels like monkey wrenches, but thank you.

Nope. That's how you build a budget. It is uh a lot of art and science combined.

So, we can pick this up on Thursday.

Can I let me do, if you don't mind, I'm

going to rewind and get past Stacy because I have one slide. It was an update because it was something that a um the circle was in the wrong place at the quarterly meeting. Um and so it's just the question of and this was kind of the side the slide you see with a general statute attached the auditor shall be selected and shall be shall report directly to the governing body. So I just wanted to make that update kind of correction for you all um that you had seen in a pre previous meeting.

So Sher Becker should have called you back.

I know [laughter] I'm like what?

And then you you will be seeing more information on the auditor selection in the coming weeks. Mhm. [clears throat and cough]

And so with that,

I would entertain a motion for the council to go into close session. Pursuant to GS43 318 11A13 and6 I move that we will close session to consult with attorneys employed by or retained by the town in order to preserve the attorney client privileged by the town and the attorneys prevent the disclosure of information that is made privileged or confidential pursuant to the laws of the state including GS143 31810E or not considered a public record within the meaning of chapter 132 of the general statutes. Consider the qualifications, competence, performance, character, fitness, conditions of employment, conditions of initial employment, one or more individual public officers or employee, and to hear or investigate a complaint, charge, or grievance by or against an individual public officer or employee. Second

motion, second discussion. All in favor, please say I. I. Any oppose? Motion carries unanimously and the council will stay in this room and go into close session.