ITEM 15 ATTACHMENT 1 - Laserfiche WebLink

The City Council also adopted key budget principles to guide budget development, focusing on fiscal sustainability and promoting strong community engagement: • Long -Term Fiscal Stability- Prioritize sustainable practices and reduce reliance on one- time funding; • Protect Core and Essential Services - Prioritize the preservation of essential over non- essential programs and services; • Community Engagement and Equity- Engage the public early and consider equity when evaluating service impacts; and • Prioritize Infrastructure- Maintain and improve core infrastructure, including the City's capital and maintenance needs. A Budget Advisory Committee (BAC) was appointed in December 2024 and held four meetings between January and April 2025. The BAC's overriding responsibility was to provide input on community priorities as reduction options were discussed to arrive at a balanced two-year budget, and to start to think about opportunities and other operational changes to move the City toward greater fiscal stability. The City hosted a Budget Town Hall where attendees received information about the budget and programs and services provided by the City, and sought additional input from the community through an online engagement tool and a pop-up event. These sessions included exercises for those attending to weigh in on potential service reductions. In addition, each City Council meeting from November 2024 through April 2025 included at least one significant budget -related agenda item, including topics such as budget presentation and principles discussion, independent financial assessment presentation, baseline budget and preliminary long-term forecast presentation, analysis on the use of pension and other post -employment benefits (OPEB) trust funds, and cost reduction and capital project recommendations. These agenda reports have further clarified the City's financial position. Importantly, an independent assessment by an outside firm validated the City's work and highlighted the City's sizable budget deficit and affirmed the City's use of best practices in financial forecasting methods. The FY 2025/26 and FY 2026/27 Proposed Operating Budget reflects the results of this exhaustive and collective effort. Overall, the General Fund Budget anticipates modest revenue growth over the next two years. While this projected growth will enable the City to continue providing critical, core programs and services to the community, it is not enough to address all of the City's needs and close the structural deficit. Expenditures are projected to continue growing at a faster pace. As such, the balanced proposed budget was achieved using one-time funding, including $4.0 million from the Section 115 Pension Trust, $2.1 million from the Retiree Medical/Other Post -Employment Benefits (OPEB) Trust over the next two years, $3.0 million from the Capital Reserve, and service reductions. While the Proposed Operating Budget, as presented, is balanced for the next two years, service reductions, as well as one-time funds, were utilized to balance the budget. This is not sustainable, and the structural deficit remains. This situation will be exacerbated by any economic downturn and/or costs rising beyond what is projected. Without further service reductions and/or supplemental, sustainable, ongoing revenue, the City will continue to face this challenge. Additionally, the funding needs for the City's capital infrastructure remains significant at approximately $900 million over the next 10 years, and this number is projected to go up as additional deficiencies are identified based on more thorough assessment of the City's facilities and other capital assets through the Asset Management Plan study currently underway.