Presque Isle council reviews draft 2027 budget, weighs surplus use

[0:00] Mayor/Chair (presiding officer): everybody and welcome to the prescott city council workshop for thursday october 1st 2026. On our agenda this evening we are looking at our budget overview for 2027. Sonia would you be so kind to lead us into this please. Thank you very much welcome. [0:24] City Manager/Administrator: And good evening. Tonight is a working session intended to give council a clear picture of the preliminary 2027 budget and the choices that affect our tax rate. With me tonight is the budget team, Louis our city assessor, Laura our finance director, and Kelly our human resources director. Each is here to answer questions within their area of expertise. What you have in front of you is the draft of the 2027 budget and a tax commitment worksheet. The tax commitment worksheet we will use after the presentation. First we'll look at a brief PowerPoint and look at budget philosophy, operating expenses, revenues, capital plan, reserves, tax increment financing, and some future pressures. We will put the tax commitment worksheet on the screen and change assumptions together, looking at what happens when surplus is increased or decreased and how those decisions affect the mill rate, remaining reserves, and tax requirement. And then finally, we'll answer your questions. The 2027 Budget Framework, Capital Improvement Plan, Operating Budget, and Revenue Projections. tonight's presentation involves three connected budget discussions. The first is the capital improvement plan which assets and projects should receive 2027 funding will illustrate our strategy pressure points and our approach. Second is our operating budget what does it cost to provide current services and what is driving change. The third reserves tax increment financing and tax requirement how should we fund the plan while managing the burden on the general fund and taxpayers. Our management approach is that we have shifted from what our departments requesting toward what does the city truly need now what can responsibly wait and how do we prevent today's financial pressures from becoming tomorrow's crises. Let's look at some preliminary numbers this is our 2027 budget at a glance our preliminary property tax requirement is down $216,000 or 1.27% from 2026. Tonight we're going to present you with two options. One, zero dollars proposed from surplus and the other, $185,000 proposed from surplus. Last year we approved $800,000 used in surplus to offset the general fund. The CIP request, the capital improvement request, is a total of $604,700. We reduced that by $2,504,881. That's It's an 80% reduction from requests made, and we'll show you how we arrived there. The net municipal appropriation lowered by 635,776. That represents a 6.90% reduction from 2026. Our operating request this year is $20,129,000. And that is reduced by $163,774. That's a 0.81% reduction from 2026. And finally, our state revenue sharing increased by $447,000 from 2026. The preliminary plan reduces the citywide tax requirement while substantially reduces reliance on one-time reserves and gives immediate general fund relief. Some key financial terms that you will see throughout this presentation. The first is tax increment financing. Tax increment financing, or TIF, allows a municipality to capture a portion of new property tax revenue generated and reinvest it in eligible economic development projects and activity. A capital expense is a significant investment in inquiring, replacing, or improving a long-term asset such as buildings, vehicles, or equipment. that provides value to the city beyond the current budget year and reserves are funds set aside over time for future needs unexpected costs major repairs or planned capital investments it's important for you to know what our budget priorities and principles were as we were developing this budget the first we applied a disciplined review to confirm that each request qualifies as a capital expense assessed its urgency and timing and identify the most appropriate funding source including tax increment financing grants reserves or private investment where available shifted from primarily replacing assets to intentionally preparing Presque Isle for development growth and long-term opportunity. Prioritize public safety and the continuity of essential municipal services and this is a maintenance of effort budget. The aim is to maintain existing assets and essential infrastructure before committing resources to expansion or new initiatives. Directed capital investment toward infrastructure, housing and business development projects that support a broader citywide growth strategy. Number six, financial commitments are guided by a clear understanding of the city's taxable capacity, revenue outlook, and long-term affordability. And finally, prioritized essential needs by distinguishing between what must be funded now, what can be responsibly scheduled for a future year, and what may be supported through an alternative funding source. The budget before you represents a point eight one percent reduction, but we'd like to put that in context for you tonight. Our operating request of twenty million one hundred and twenty nine thousand dollars is a hundred and sixty three thousand seven hundred and seventy four dollars lower than the twenty six appropriation, and we are proud of that, but we also want you to know that while it is lower than last year, but when compensation adjustment assumptions and inflation are factored in, the city is absorbing about $750,000 in real pressure or reduction. The next part of this presentation is an opportunity to look at the tax commitment summary, and our finance director, Laura, is going to come up and explain what these two summaries say and what the options are. [9:16] Finance Director (Laura): Good evening, Council. So before you, have a couple different views of where our tax rate calculator stands. You will see on the far left side of the screen, there is a projection of, I believe, $0 in surplus. If we do not utilize surplus this year, we are still looking at a 0.04% reduction to the mill rate. So we're looking at $20.21 if everything is pictured here is essentially accurate. And then you'll see the next slide, please, Eric. On this slide, you will see that we would be using $185,000 from surplus. If we use $185,000 from surplus, we would be at a $19.99 mill rate. That would equate for a 1.26% reduction. And you guys are open to select pretty much any amount that you would like to see there. We will work on that further into our workshop here. But if we used $185,000, we would see a 26% decrease in the mill rate. [11:06] City Manager/Administrator: Approximately $2.5 million in 2027 general fund capital relief through future year funding and alternative funding sources. This includes approximately $1.47 million redirected to our tax increment financing program, reserves, grants, surplus, or private investment. We found six different paths for two million dollars, five hundred and fifty three thousand that was taken out of the capital improvement plan. And that's, this is, this is the list of where that two million five hundred and fifty three thousand dollars ended up. The first was we planned for future years, so $868,000, 34%. We planned it for a future year. $848,900, we are going to use our tax increment funding program to fund those items. $349,000 approximately, we put back into the operating budget. It. Funded from reserves, $381,305, or 14.9%. Pending grant funding, $100,000, and potential private investment, $5,500. Most of our capital investment goes to facilities management. That's 62.9 percent. Second is public works at 15.4 percent, fire 13.1 percent, and this year, which is a bit of an outlier, city hall 8.6 percent. Nearly two-thirds of the recommended 2027 capital investment is directed toward municipal facilities and building systems. So as we looked at the capital improvement plan real hard, we found many of the items simply did not belong in a capital improvement plan. So several requests needed a different accounting treatment. We were classified or funded them outside of the capital improvement program. EMS education, public safety lease agreement, economic development consulting, events and software, imaging updates, enterprise fleet financing, and emergency reserve funds were all taken out of the capital improvement plan. We flagged eligible expenses for funding under the applicable tax increment finance program, stormwater and streetscape culverts, bike path paving, development engineering and site readiness, GIS and development consulting, our enterprise fleet financing. Funding these requests with TIF eligible programs provides immediate general revenue relief. Our plan is to amend our TIF eligible program and with approval from the state DECD, we have an additional $612,000 that could be funded from this budget, public safety and security, development, public safety education and training, and other economic development related expenses, primarily salaries. Another way that we reduced the capital improvement plan is a proposed use of solid waste reserves. This was created to hold state reimbursements for landfill closure costs between 2013 and 2023. First, a contribution toward Public Works roof and plow truck at $179,000. This plan pairs this reserve amount with $120,000 in the manager recommendation against a $249,000 request. Request. Public Works Heating Controls. This plan classifies the item as an operating expense and proposes solid waste reserves as the funding source. This leaves a balance of $526,000 approximately in solid waste reserve that could be invested assertively into an investment portfolio or a direct investment into an economic development project intended for growth. This is a policy decision of capital preservation versus capital deployment. There are some pressure points in this budget. The first asset replacement for year, for future years, accumulate and may return together to public tolerance for new spending. Three capital needs are rising faster than reserves can support. Paving and equipment absorbed some of the most significant reductions in the 2026 and 2027 capital plan. For municipal buildings need repairs that drive energy costs. Anticipated future year cost would be an excavator, for example, an ambulance replacement, fire apparatus, City Hall and facility systems. The question for council is, how do we reduce pressure on taxpayers today without creating greater costs tomorrow? And tonight, the council direction, the 2027 recommendation focuses available resources on immediate municipal needs while preserving flexibility for future obligations and development opportunities. We're asking you to review the recommended 2027 capital and operating priorities and funding strategy, recognize future needs that require continued planning, use reserves, TIF grants and partnerships where appropriate, continue building reserves for asset replacement, municipal building repairs and infrastructure and revisit major commitments as future community validation valuation dictates. The goal is a capital plan that protects essential services today while restoring the city's capacity to invest wisely tomorrow. The work ahead is significant, but so is the opportunity. I'm excited about what Presque Isle can become. Laura and I are ready to see what the impacts are on all of the numbers. This is the tax rate calculator. What we wanted to do tonight is to see what the impacts are on some of these numbers that we play with. So what we're going to do, since we've given you two options for surplus, we thought we would have you select a surplus number. The surplus number can be between zero and a million dollars. And where the pink is, and that zero, is where you would fill in. And if you pick a surplus number, we will then plug it in there and see what your number does to the bottom one. What [20:26] Mayor/Chair (presiding officer): about your $185,000 surplus? [20:33] City Manager/Administrator: So what we did with that is what would bring the mill rate to $19.99. [20:42] Mayor/Chair (presiding officer): So you were trying to use that to target your mill rate? Right. That was the target. [20:46] City Manager/Administrator: Understood. So that's what we were trying to do with that from the $185,000. Really what we were trying to do is not use surplus at all so that we could come in with a budget that's not but that's a policy decision it's not bad to use surplus it just simply we would like to have your advisement before we used 800,000 last year so that gives you kind of a benchmark for and the year before that it was 600,000 so we tend to we tend to use a lot of surplus year over year so this year we just thought we would give you a zero figure we put in 185 to show you the impact of the mill rate and then you guys can give us some idea based on our exercise tonight of what where you'd like us to land do [21:47] Mayor/Chair (presiding officer): you think that there's 185 000 that could be trimmed out of this document somewhere so we didn't have to use any surplus and we could still end up with a $19.99 mill rate? [22:00] City Manager/Administrator: The short answer is yes. Would it affect services? Possibly. Possibly. There are some opportunities there. And I will also say another $600,000 allocated to TIF is going to bring that number down that you see, the $20 million, which has not been accounted for. So what's the number, Laura, for the TIF if it's $600,000? That's guaranteed? No. [22:37] Speaker D (unidentified): But it fits. Is that incorporated into that number now? It is not. I mean, Laura's last financial showed that we're under budget by $2,093,000. To me, using a million dollars as a surplus doesn't seem... [23:06] City Manager/Administrator: So why don't we pick a number, and then we'll have some discussion after. If you guys can just pick a number. Do you want to plug in a million? Yeah, let's do it. Eric, would you plug in a million and see what happens? [23:16] Speaker E (unidentified): One thing that Mike mentioned, and I think it bears saying right now so the public isn't confused, we didn't we didn't overtax by two million dollars this year that is not we have expenses because we either people that weren't hired left employment or other things that we have not spent in the [23:45] Speaker D (unidentified): wow it was really cheap last year [23:47] Speaker E (unidentified): so that was so we so we've saved that money through not spending money that required for some reason that we very much expected to spend so we're in a great position and I agree with that but I just want to make sure people that we didn't overtax you by two million dollars that we anticipated that's what the budget would be and we work very hard on that budget but we are lucky we have revenue we haven't expended the [24:18] Speaker D (unidentified): projections have [24:38] City Manager/Administrator: been, have been moved to a future year for several years. Okay, right, so when our department heads come up and say this is what I recommended, this is what the managers recommend, you have a choice to say whether you want to fit that stuff, and they'll have ways of in dollars brings it down 19. So does anybody else have a number so [25:28] Speaker E (unidentified): the million dollars that we just put in perplex money from surplus, we haven't accounted for the 600, we have not. So let's add to that the additional 600 and some thousand that could come from additional tiff use, and again I, that just to clarify that I heard you right, that extra 600 000 would be because the state has updated what we can spend money from tax increment financing districts. We couldn't in the past, we can for next year as long as we update our document. That's right, so if our document is updated that makes that money available. That's right, okay, that's correct, that's what I understood. [26:11] City Manager/Administrator: Okay, good, now are we taking that you want to add it to, yeah, all right, so it should [26:42] Finance Director (Laura): be under general fund revenue, right, 2.4 million, that was correct, that's your board and 3.5. [26:57] Speaker D (unidentified): Why are no one million six hundred twelve thousand, why is our revenues 812 higher than what's the big leakers there, so [27:19] Finance Director (Laura): 212 000 of that mic was a solar reimbursement that we received from the state that wasn't in the budget. We're supposed to add six to the million [27:28] Mayor/Chair (presiding officer): one million six hundred negative [27:45] Speaker E (unidentified): well that would be great. So this is kind of clarification again, so what we don't have for final numbers yet are a couple of three things we don't know in this fight. So even if we put this in as a number, we don't know what the county finally will give us for their budget, so that could affect taxes. The county's currently lower? [28:29] Finance Director (Laura): So we that's part of the third payment, so in 2027 we won't have that additional hundred and ninety-four thousand. Okay, but that doesn't have any like expected increase? No. That's just what we would have paid had we not [28:42] Speaker E (unidentified): had that third payment. So the county changed their tax year, and then we had to make up the difference of going, so we had to pay a year and a half, and so we split up the half a year over a three-year period, and so we're at the end of that now. So that's that. But we don't know what their final budget will be. We don't know what the school's final budget, what the state will value our community yet. So that, so we could have some further expenses in this. But as Mike mentioned, we have some extra money that I [29:33] Speaker D (unidentified): had too much because then it'll make it [29:36] Speaker E (unidentified): So but I guess the point is that if we, if we look at this going into this tax year as we go through, we're in the best position we've been in a decade. And I guess to my hats off to you and your team, you've spent, you've been sitting in the book looking at it as we always do during the budget process. But by you doing that ahead of time, like most years we come into this and we're 800 behind, 800,000 behind or a million behind. This year you're presenting us a budget this flat, which is unheard of in a decade that I've dealt with this. That's incredible. And the next thing I would say is that now the forethought of this community with our tip district and with the development plans that we've had in place, now they are starting to pay off in the sense that we are capturing that value of development in our community. And so the new businesses around town that you see, you know, the car wash, the Dunkin Donuts, you know, across town, the Napa building, as well as other businesses. So we're unique in that in the county because most communities don't have a, any development, but be a way to capture that to utilize for the taxpayer. So this year was, you've already helped us immensely what you've done so far, and now this next two months of us going through the budget, we are starting out in a great place. [31:55] City Manager/Administrator: Our team is here at our presentation for tonight and at our desks through the week and email and whatever you need. Call department heads directly if you need their contact information. Let us know. They worked pretty hard on their budgets, and they're ready for your questions as well as, well, happy is, you know, not the goal, but okay. No, I know that, but [32:44] Speaker D (unidentified): so before we switch to the new budget system, there used to be more detail comparing expenditures on, so like, we can, you remember the old like Mel Hovey budget style, and then we moved to a new system which had some improvements, but now it makes it harder to tell how things are moving on an individual, think [33:26] City Manager/Administrator: The system really limits us, but if you have specific things, big ticker ticket items, we can bring that, we can research that for you. [33:36] Speaker D (unidentified): Money, yeah, it used to just be nice to see, well, [33:42] City Manager/Administrator: it was helpful it informed I do in fact Laura and I talked about that today because we 've had questions internally well what did they do with that five years ago what are the trends on this but yes we can we can help we [34:04] Speaker E (unidentified): have the trend is that in one of the, well, [34:27] Speaker D (unidentified): just share with you that if that mill rate were to go to 1830, that's a three hundred ninety dollar difference on a tax bill, one two hundred thousand dollar home, I mean, yes, I just, I don't want to get it into a yo-yo effect, or we just had a big increase because of what valuations did, and then we overshoot, and then next year, the next year, it's a big, like, you know, it's ketchup. [35:25] Speaker E (unidentified): It's absolutely better. And we certainly will be set up their payments, their taxes. And then when it comes time to pay their bill. [35:45] Speaker D (unidentified): No more surprises. No more surprises. I would like to figure out. [36:22] City Manager/Administrator: Funding doesn't have to be the whole year. We don't intend to fund it for the whole year. So we heard that, and we incorporated it. That's right. So, yeah. And what we can do to help you with your decision-making and questions, and we're getting you home at a respectful hour. That was the goal. Yeah. [37:04] Mayor/Chair (presiding officer): Yeah. Okay. Fantastic work, folks. Awesome. Yep. So how [37:25] Speaker D (unidentified): does that work for somebody who has a mortgage without [37:31] Speaker E (unidentified): bouncing up and down? Yeah, because then you have to add to it. Oh, I know. I know. I do it every month, and I watch it go up and down, up and down, up and down. So this time of year, you know, at the beginning of the year before the tax bill, if you know, we set a budget and we can't know what the school or the county will do, so we can't predict, if we can give some certainty at least on our part of the bill to say that, you know, we're not, we're not increasing your taxes, so you know whatever you took out last year to pay your bill, if you escrow that, you shouldn't have a surprise, and frankly, busts in their account. [38:12] Speaker D (unidentified): Well, the company knows it goes. That's the point. Every time, unless you know, you either have a choice to pay this percentage up front, or mine does, or pay it in your monthly increments again, [38:27] Mayor/Chair (presiding officer): which makes it go up. [38:28] Speaker D (unidentified): So the thing with mine is that if I don't... [38:39] Speaker E (unidentified): The next year. You'd have to take the return on that round and put that back in the tax account. [38:42] Mayor/Chair (presiding officer): Is there any way we can guess [38:44] Speaker D (unidentified): what that tax number would be for next year? [38:47] Speaker E (unidentified): That means we adjourn our budget meeting. [38:52] City Manager/Administrator: Yeah, so actually, Craig did experiment with that a little bit, and we moved it up to 1.3.