Council Regular/Special Meeting

MINUTES OF THE GILBERT TOWN COUNCIL, IN SPECIAL MEETING, SPRING FINANCIAL RETREAT, OF MONDAY MARCH 11, 2024 AT 8:00 AM, MUNICIPAL CENTER I, TOWER ROOM 300, 50 E. CIVIC CENTER DRIVE, GILBERT, ARIZONA COUNCIL PRESENT: Mayor Brigette Peterson, Vice Mayor Scott Anderson, Councilmembers Chuck Bongiovanni, Bobbi Buchli, Yung Koprowski, Kathy Tilque, and Jim Torgeson (attended virtually) COUNCIL ABSENT: None STAFF PRESENT: Town Manager Patrick Banger, Town Attorney Christopher Payne, Town Clerk Chaveli Herrera, Deputy Clerk Judy Martinez, Assistant Town Manager Mary Goodman, Assistant Town Manager Dawn Prince, Assistant Town Manager Leah Rhineheimer, Town Engineer Susanna Struble, Parks and Recreation Director Robert Carmona, Fire Chief Rob Duggan, Police Chief Michael Soelberg, Office of Management and Budget Director Kelly Pfost, Tax Compliance Manager Sara Radbury, Intergovernmental Relations Director Rob Bohr, Public Works Director Jessica Marlow, Chief People Officer Nathan Williams, Total Rewards Manager Shawn Irula, Development Services Director Kyle Mieras, and Financial Services Officer Tanya Wright OTHERS PRESENT: Facilitator Matt Lehrman AGENDA ITEM CALL TO ORDER The meeting was called to order at 8:10 a.m. 1 ROLL CALL Town Clerk Herrera confirmed a quorum was present. Town Manager Banger welcomed everyone and said the morning agenda items were regarding legacy projects that would set up the community for success in the future. He said the afternoon session included items that were greatly impacted by legislation and inflation. He noted if there were any ballot issues coming forward, they had a tight turnaround time. Facilitator Matt Lehrman discussed the importance of the items. AGENDA ITEMS 1. Cost Estimate Methodology Town Engineer Struble discussed the Capital Improvement Plan (CIP) budget development including initiating, vetting, and actual costs. She described initiating as once they got a project, they needed to determine costs and funding. She noted they started with the base number, or building cost per square foot, but it only represented an empty building. She discussed fees, design and construction management costs, furniture, and equipment as other factors included in the budget. She said umbrella costs or project uncertainties were also added. She discussed considerations of risk management, unforeseen circumstances and market uncertainties, political events, labor availability, and other issues, then mentioned scope changes. She discussed construction escalation, then said their budget was inclusive of all project costs and provided an actual example of cost escalation. She discussed costs for things built “today” versus in the future. Vice Mayor Anderson asked about value engineering. Town Engineer Stuble stated they were adding that into projects, as well as efforts to understand expectations and evaluate if they were successful. Assistant Town Manager Rhineheimer said they would be adding research in an effort to be comprehensive and to think through how to build the best facility with the best approach. 2 Councilmember Koprowski discussed anticipating changes in the future and how they would manage volatilities. Town Engineer Struble said they would be watching that more intensely and were making it a consistent practice. Councilmember Bongiovanni asked about construction profitability for the companies doing the building. Town Engineer Struble said typically it was 5 to 7%, and was built in with the Guaranteed Maximum Price (GMP). Councilmember Buchli expressed concern that the escalation percentage was not enough compared to the inflation rate. Town Engineer Struble they were adding between 20-30% per year for escalation, based on current year, and the inflation rate last year was between 15-20%. Mayor Peterson discussed the numbers provided and stressed the importance of an explanation of what was included in the numbers. 2. Prioritized Quality of Life Investments Parks and Recreation Director Carmona said this was “part four” of Quality of Life investments presentation with Parks and Recreation, Police, and Fire. He said although sometimes it would appear that public safety and parks and recreation were always competing for money, in the best communities those departments worked well together; he provided examples of how the three departments collaborated. He summarized a Capital Needs Recap including 33 CIP projects. He said if there were any potential ballot initiatives, there was a timeline of May 7, 2024, needed for a resolution with ballot language to be considered by the Council for the November 5, 2024 Election. He discussed how the parks were full, programs were maxed out, and growth was outpacing the services they were providing. He provided a project overview, then said the Riparian Education Center was recently added to the list. He also noted a potential recreation 3 center in south Gilbert, stating it would likely be more of a hybrid model of the Freestone and McQueen facilities. He reiterated that they were over capacity and, if residents did not sign up within the first few days, they were on a waiting list. He discussed concerns regarding deteriorating quality and high numbers of people using facilities. He highlighted Gilbert being the national leader in community engagement, then discussed geographic accessibility and amenity access, as well as impacts of system decline and high services on community. He noted that crime rates would rise without having access and availability to programming, adding parks and recreation was a driving force of where people chose to live and how it impacted property values. He highlighted priorities indicated by the community and the Parks and Recreation Advisory Board, the provided the new prioritized project list. Police Chief Soelberg discussed prioritization, stating the items not prioritized were still needed. He said the Advocacy Center Phase 2 would take care of the victims, was designed for build-out, and would include space for nonprofits. He discussed the San Tan Police Substation being over capacity, noting they would have to move into trailers, regardless of if it was funded now or not. He discussed the Public Safety Building Expansion also being short with space, even after bringing some staff into the Advocacy Center in the future. He discussed the Crime Lab and the importance of defining Gilbert’s own priorities. He noted the needs of employee wellness, victim-centered policing beyond the Advocacy Center, and technology and innovation, including having a real-time crime center. He highlighted the project timeline, stating the Advocacy Center Phase 2 and Public Safety Center Expansion were hoped to be completed in 2027, the San Tan Police Substation in 2028, and Crime Lab in 2029, should funds be available in 2026. Fire Chief Duggan highlighted the community aspect of their department, then provided a project overview and discussed why some of the project costs were reduced. He discussed reprioritization and the need to relocate and have temporary housing for staff. He called the years 2030-2032 “the cliff”, when many crew members would be retiring. He noted the efforts to prepare for the loss of experienced staff and said they would likely be losing paramedics at that same rate. He showed the Fire Administration Remodel as top priority, followed by the Fire Fleet Facility, then leading into the Fire Station 4 rebuild, and 4 then fire station remodels. He summarized the needs regarding response times, effectiveness, flexibility at buildout, risk, and conditions needed to protect people. He noted how data would drive where assets were deployed and how that would evolve to match current and emerging threats. He highlighted the project timeline, stating the Fire Administration Building and Fire Fleet Maintenance were hoped to be completed in 2027, Fire Station 4 in 2028, and Fire Stations 2 and 8 in 2029 or 2030, should funds be available starting in 2026. Parks and Recreation Director Carmona discussed prioritizing using the $650 million funding scenario for 24 prioritized projects. He repeated the ballot initiative timeline for a November 5, 2024 Election Day would have a May 7, 2024 deadline for a resolution with the ballot language. Councilmember Buchli asked about the location or cross streets of the Rittenhouse Consolidated Canal. Director Carmona said it was about 15 miles long and went through many cross streets. Councilmember Buchli discussed the need for meeting places and other uses with the Advocacy Center Phase 3. Chief Soelberg said those uses would still be needed, but they could use other locations until Phase 3 was done. Councilmember Bongiovanni discussed the price of ballfield improvements, stating it was mostly grass and dirt. Director Carmona summarized costs to remove concrete, add restrooms, and other costs, adding the most popular ball fields were nearing the deterioration phase. Councilmember Torgeson said he saw about eight unused ballfields on a map that seemed to be owned by the Town. Director Carmona stated he would have his team contact Councilmember Torgeson to get those locations and do research. Councilmember Torgeson discussed the costs of building and operating the Crime Lab, stating the intergovernmental agreement with Mesa for crime lab services could be changed if needed. Police Chief Soelberg discussed the risks associated with relying on others for services, the importance of being fully independent, and having the ability to set Gilbert’s own priorities. Assistant Town Manager Rhineheimer echoed those statements and said Mesa did a great job, but had to prioritize its own caseload first and were taking on other agencies’ caseloads as well; she discussed risks and the five year lead time 5 associated with a crime lab and process of getting it accredited. Town Manager Banger stated Chandler was considering investing in it. Councilmember Torgeson stated he was a “deep red” against Gilbert funding it on its own, adding there was no recoup on investment and other agencies could use it for free. Assistant Town Manager Rhineheimer emphasized the risks of dependency on other agencies, then restated the long lead time needed to prepare for accreditation. Town Manager Banger noted if Gilbert were to partner with Chandler on the Crime Lab, there was a short window, as Chandler had its funding and was ready to begin. Councilmember Buchli asked if other agencies could use the crime lab for free. Police Chief Soelberg stated with the State they all had to provide certain services for everyone with high profile or serious incidents; otherwise, they would only provide services for those under contract, and cost recovery for services and personnel. Councilmember Buchli asked if any other cities were considering partnership. Police Chief Soelberg said only Chandler could maybe invest now, as they received funding in 2022 to build their own lab; he added Queen Creek and Tempe did not have money allocated, but Tempe would come with a large body of work. Councilmember Buchli said she was “green” on the Crime Lab, noting she believed there were opportunities for other partnerships. Councilmember Buchli asked why the Riparian Education Center was prioritized over many other items. Director Carmona said it had been on their radar for a long time, then discussed how it was one of the most popular attractions in Gilbert. Mayor Peterson asked if the Riparian project included a remodel of parking lot at the library; Director Carmona replied no, it was a separate project. Mayor Peterson suggested moving the Fire Station 11 Remodel below the priority line and moving Advocacy Center Phase 3 above the line, adding she would like to see the Advocacy projects done together and that corner of the street finished. She said she would also get rid of south Gilbert pool, unless they did a north Gilbert pool as well; otherwise, she indicated the priorities were good. 6 Facilitator Lehrman and Town Manager Banger confirmed the Council was about 80% in favor of the Crime Lab in partnership with Chandler. Councilmember Torgeson said he would leave the Crime Lab above the line. He discussed an immediate need for parks and recreation, like ballfields, adding he would like to focus on projects that could eliminate stress now. Mayor Peterson noted if Gilbert was to seek a partnership with Chandler, it needed to be a priority now because Chandler bonded for it and was ready to begin. Councilmember Torgeson agreed, noting he was not in favor of a voter bond. Councilmember Bongiovanni said he was a “green” to a partnership with Chandler on a Crime Lab. He considered the messaging for that, asking why would the 2nd safest city need a crime lab; Police Chief Soelberg responded it was to keep it safe. Councilmember Bongiovanni also agreed to move Fire Station 11 down from the top priorities, but asked how it would impact the Fire Department. Fire Chief Duggan said Fire Station 11 did have the lowest call volume, but they would still have to solve the deployment problem. Councilmember Tilque stated she supported Advocacy Center Phase 3 moving up; she was interested in moving quickly with a potential partnership with Chandler on the crime lab. She also supported Fire Station 11 moving below the priority line, as well as the other remodels moving down in priority status, but still above the line. She said she thought the Council was clear on not wanting to be in the aquatics business. In terms of the Recreation Center, she indicated she was starting at “red” because she was concerned that current efforts were not staffed at the level they should be. She said she was more concerned with not keeping up and how that could be fixed first, before adding more. She said she would prefer the recreation center to go below the priority line, but if it stayed, she would like to see it a longer term item and explore other facilities for short term. Fire Chief Duggan said if Fire Station 11 phasing was below the line, it would make sense based on data, but operationally would likely drive smaller CIP projects. 7 Councilmember Torgeson indicated he was “red” on pools. Town Manager Banger noted that the pools were being sought by the residents. Mayor Peterson restated that if a pool was on the list, there should be two pools for north and south Gilbert. Vice Mayor Anderson agreed to not adding pools. The majority of the Council was favorable to moving Fire Station 11 below the priority line and raising Advocacy Center Phase 3 above the line. Councilmembers Bongiovanni and Buchli were not in favor of moving a recreation center below the priority line, both supporting a center in south Gilbert. 3. Review of Available Sources of Revenue for Capital Projects Office of Management and Budget Director Pfost began by discussing Public Private Partnership (PPP) opportunities that may help close some gaps and offer revenue sharing. She highlighted revenues with restrictions and defined Bed Tax. She provided an overview of Property Tax and Sales Tax, stating Secondary Property Tax had to be used for one-time projects, must be approved by voters, and was paid by property owners in Gilbert. She said Sales Tax was an ongoing revenue stream, very volatile, could be used to cash fund or bond projects, and was paid by residents and visitors. She summarized options with Property Tax at the $0.98 rate showing about $100 million of funding for projects. She noted there was less room for principle in the early years; early payments would be interest only, and most of the principle would be pushed into the latter part. She provided a scenario of Property tax with a target rate of $1.15 to provide about $350 million of funding for projects, then provided a Property Tax rate comparison with Gilbert currently having the second lowest rate. She said if there was General Obligation (GO) Bond Funding, it would require a call of election in May 2024 for the November 2024 election. Director Pfost discussed Sales Tax, stating it could be used to cash fund or bond for projects, noting bonds would be needed due to timing of infrastructure. She discussed revenue from hotels, restaurants/bars, then food for home consumption being restricted for tourism if the rate exceeded the retail rate. She provided a Sales Tax comparison with 8 neighboring cities, showing Gilbert and Chandler with the lowest rate of 1.50%, and summarized Sales Tax changes with those cities since 2018. She said it did not need to go to voters to increase the Sales Tax rate. She discussed Gilbert’s zero rate Use Tax, then described it as online sales; if the online vendor did more than $100,000 sales in Arizona per year; they paid Use Tax. She provided Sales Tax options with the current rate of 1.5%, then examples if the rate was increased by 0.3%, 0.4%, and 0.5%. She discussed the timeline for increasing Sales Tax, stating a Notice of Intent and written report would need to be done in July/August 2024; a consideration of the Council would need to be added to a Council agenda before October 22, 2024, and the other requirements would need to be done before November 1, 2024, to allow for a January 2025 effective date. She provided some combinations of the options with all Property Tax, both Property and Sales/Use Tax, and all Sales/Use Tax. Councilmember Bongiovanni asked about Bed Tax rates. Tax Compliance Manager Radbury stated Mesa’s Bed Tax was 5% compared to Gilbert’s 2.8%. Councilmember Bongiovanni supported bringing Gilbert’s bed tax rate to 5%. The Council indicated they were all in the “green” or “yellow” on Bed Tax raised to 5%. Councilmember Bongiovanni discussed changing the Sales Tax rate to 1.95%; the group discussed different percentage and timing options. Mayor Peterson asked about pending legislation. Intergovernmental Relations Director Bohr stated there was a bill proposed for a needed 60% voter turnout in order for a bond initiative to be successful; he said there was a little bit of risk down the road with bond elections, but he could see legal challenges as well. Councilmember Tilque expressed concerns with relying solely on Sales Tax, as it was not predictable, then asked what if there was a recession. Director Pfost agreed that Sales Tax was more volatile than Property Tax; she discussed some safety features including cash flowing for projects. Councilmember Tilque restated she did not like the uncertainty of putting projects in the Sales Tax bucket, but said asking voters for approval was difficult. Mayor Peterson stated she did not want to change the Secondary Property Tax rate. 9 Councilmember Koprowski stated she did not want to increase the Property Tax rate unless they had a greater need from a ballot perspective; she said with Sales Tax, it would be more equitable and would not just be bored by property owners, and if you were conservative and frugal, you would pay less. They discussed other funding sources. Assistant Town Manager Goodman noted if they were looking at the $650 million scenario for projects, the full total needed was $1.2 billion, so there was still a delta and a significant amount of CIP projects not funded. Facilitator Lehrman asked if the argument was that it was better to spread the need for revenue and to bring in a Property Tax increase now. Assistant Town Manager Goodman noted the need to understand that if they went with the Sales Tax only option now, there may be a consideration in the future for a voter authorized bond, which may be more challenging in the future. Councilmember Torgeson said he despised Property Tax, but at least there was a future option. He said he was amenable to Sales Tax and definitely to Bed Tax. Councilmember Koprowski discussed the scenario with a 2% Sales Tax rate, then indicated 2% was her maximum. Councilmember Buchli stated she did not support increasing Property Tax, but was fine with 2% Sales Tax rate. Councilmember Tilque stated she was leaning toward the option for both, a 1.87% Sales/Use Tax rate with $100 million GO bonds; she said that was more predictable but there was risk in asking voters. Mayor Peterson spoke in support of 2% with Sales Tax if they were going to raise it and spoke against a bond election; Councilmember Bongiovanni agreed, adding he liked that others paid sales tax, not just property owners. Vice Mayor Anderson said Gilbert was typically dead last for what it was charging and should not be afraid to do an increase; he was in favor of 2% and no voter-approved bond. Councilmember Torgeson also agreed with Mayor Peterson. Public Works Director Marlow said with the Sales Tax rate option, it would take a long time to get all the projects going; she asked about options to bond for a smaller amount and pay less interest. Director Pfost and Town Manager Banger answered yes, there were options, but noted they would have to have the full budget for any project before starting, so they would have to manage that and see how cash flow went. 10 The Council recommendation was a Sales/Use Tax rate of 2.0%, not asking for voter- approved General Obligation (GO) bonds this year, but keeping it as an option for the future, as long the Secondary Property Tax rate remained the same, and increasing the Bed Tax rate to 5%. Mayor Peterson noted that the current Council could not lock future Councils into keeping the current Council’s recommendations. They supported the Notice of Intent to Increase Fees in August and the vote of the Council in October for Sales/Use Tax and Bed Tax. The meeting was recessed at 12:21 p.m. for lunch and reconvened at 1:18 p.m. 4. Ambulance System Current and Allowable Rates Fire Chief Duggan discussed the background and decisions made previously to allow Gilbert to add the ambulance line of service. He said the transportation rate was a user- based fee that only impacted those who utilized the service, and the Arizona Department of Health Services (DHS) set the maximum rate that Certificate of Necessity (CON) holders could charge; this was called the Phoenix Metro Rate Group. He said it typically increased by 1 to 5%; this year 1.75% was the approved rate increase for CON holders. He provided the current rate options, and totals if they applied the 1.75% DHS 2024 adjustment. He said the recommendation was to apply for the new Phoenix Metro Rate Group, which would give them consistency with the vast majority of peers. He said as call volume increased, it would allow them to bring on a 7th transportation unit that could be flexible with staffing and would help maintain response time and CON compliance. He said the consideration allowed a more financially stable staffing model, would reduce overtime and support increasing Gilbert’s service levels to meet response time criteria, and keep call volume manageable for responders. He stated CON compliance would drop consistently until they added another unit and discussed risks. He said there was opportunity to maximize the rate, which would provide financial assurance against potential Federal and State reimbursement reductions, and would still be considerably cheaper per transport than all other providers because they did not currently charge for disposable medical supplies. He said the final ask was direction for the department to apply to the Phoenix 11 Metro Rate Group so they could proactively maintain response time criteria throughout the Town and ensure long-term financial stability of the division. Facilitator Lehrman asked for a definition of an “additional unit”; Fire Chief Duggan stated it also included staffing capability in addition to an ambulance. Director Pfost stated they had been paying down a loan of $3 million, but could not currently budget for a new ambulance. The Council all indicated a “thumbs up” in support of applying to the Phoenix Metro Rate Group. 5. Health Trust Update and Potential Plan Design Changes Chief People Officer Williams discussed the rising expenses of healthcare. He said the next presentation would clarify what was needed to be self-insured, then discuss the prior employee survey which was used as a factor to help make decisions on managing the fund and maintain employees. Total Rewards Manager Irula said being self-insured meant that the Town of Gilbert was the policyholder and could contract with administrative providers to help administer plans. She noted there was a Self-Insured Trust Board and provided a history of the health fund. She provided a quarter-over-quarter net position balance, stating it was expected to be $2.5 million below the minimum fund balance by the end of the fiscal year, because of exceeding revenues for years due to conservative rate increases that had not kept up with rising medical and prescription costs, as well as post-pandemic inflationary pressures. She noted the benefits survey that was done last year with about one-third of the employee population participating. She said the survey revealed 50% of the participants would be interested in a high deductible health plan (HDHP). She said the Fiscal Year (FY) 2025 plan design recommendation was a 3-tier rate structure including Employee-only, Employee + 1, and Employee +2 or more, instead of Employee-only and Employee and Family. She said the second recommendation was to implement a HDHP design, but it would require significant education to employees. She provided the recommendation 12 structure for the HDHP plan, including being able to add out of network coverage, as well as the option to contribute to a health savings account (HSA). She said the recommendation was also for preventative magnetic resonance imaging (MRI) that was negotiated through Banner to cost approximately $700. She said the FY2025 recommendation was to incrementally shift the cost share of 90/10 in FY24, to 85/15 in FY25, to 80/20 in FY2026. She discussed the prescription program, including reviewing the formulary and looking at ways to mitigate high cost claims and implement guardrails. She said it would include pharmacies doing some pre-authorization and adding parameters for drugs; they were also considering exploring options for mandatory generic drugs first. She reviewed the rates with the Preferred Plan and Banner Select Plan, then compared it to the HDHP plan, all with different employee scenarios. Chief People Officer Williams discussed a Lifetime Savings Account (LSA), which he said was a flat amount to all benefit eligible employees based on status. He said they were exploring the option to roll unused funds to a deferred compensation/retiree health plan, and the Town would decide what eligible expenses were included. He said enrollment could launch in May, but there was a large educational component, noting the ask of the Council was for agreement so they could start communicating it to the employees. He said an action item would be on the April 2, 2024 Council agenda to consider approval of the changes. It was asked if the recommendation would fix the problem of expenses exceeding revenue. Director Pfost stated it was a first step to help close the gap. Assistant Town Manager Goodman said it was a two or three year step; she also clarified the LSA would not be funded through the health trust. Councilmember Tilque noted the new administrator provided opportunities for the Town into the future. She added health insurance cost increases were shared by everyone. She said she liked the direction of the LSA, but was not ready to decide because of cost, adding it addressed the ability to take some of the funds after retirement to pay healthcare costs in the future. She also said she would like to look at some type of navigator to help employees with plans and providers. Chief People Officer Williams agreed that most people 13 had other primary concerns than retirement, but said the LSA model gave people the opportunity to focus on healthcare expenditures and also allowed avenues to do things that would enrich their lives today and provide choices. Councilmember Torgeson said he appreciated the Town’s health care, then asked about the prior proposal for coverage after retirement. Chief People Officer Williams said it was not included in the current presentation; he thought they had determined it was cost- prohibited for the time being, but could look into it for the future. Councilmember Torgeson said he would like to look at that information before making a decision. Mayor Peterson recalled there was not a consensus from the Council to bring that information forward from the prior discussion. Vice Mayor Anderson asked about thinking “outside of the box” regarding providing expensive or popular prescriptions. Total Rewards Manager Irula said they were looking at different options with CVS Pharmacy, a subsidiary of Aetna, including adding guardrails in place and how to mitigate or manage some uses. Councilmember Koprowski said she liked the structure and idea of adding a HDHP, but said more incentives should be offered for the HDHP. She said she did not think the Town should administer an HAS because of costs. She said she liked the LSA, but questioned the rollover portion. Chief People Officer Williams if it was a retirement health savings, guardrails could be set up where those funds could not be pulled pre-retirement. Total Rewards Manager Irula stated it would not roll into a health savings account, it would roll into a retiree health savings plan administered by a vendor, which was completely separate; it had restrictions and a full vesting schedule. Councilmember Koprowski said with that clarification, her preference was for Gilbert to provide a specific employer contribution to an HSA to incentivize people to choose a HDHP, adding a benefit was they could also make a pre-tax contribution annually. Assistant Town Manager Goodman discussed balance and allowing time for employees to adjust to the changes and determine whether there was incentive to move more people to the HDHP. 6. Development Services Fee Schedule 14 Development Services Director Mieras provided a brief history, noting the department was created in 2005 and funded by the General Fund. He discussed primary lines of services and different types of fees. He said the intent of the fees was to recoup the cost for services, and the Town did not want to subsidize; the intention was that growth paid for growth. He discussed revenue and expenditures, noting the fee schedule was last updated in 2008. He said it was not covering expenditures, and the General Fund had to offset the cost of expenditures in the amount of $5.7 million. He said historically the fees were increased by a blanket percentage in 2007 and 2008, and from 2013 through 2014 small changes were made. He noted a fee study was done in 2018-2019, but was put on hold due to the pandemic. He said the direction was to ask the Council for support in conducting a fee study for Development Services Fees and explained the process. Facilitator Lehrman asked if there were any high-level changes being pursued besides cost recovery. Director Mieras said there may be some things, such as Economic Development fees, but they had not been identified yet. Councilmember Tilque appreciated that a study was being suggested and asked about the philosophy of cost recovery; she said the projects through Development Services brought the Town money. Facilitator Lehrman said in the introduction he spoke about being strategic and clear about goals that were being pursued, then said sometimes being strategic meant being willing to incur cost to pursue a greater goal. He clarified if Councilmember Tilque’s question about philosophy was about the strategy pursued in the study and not only cost recovery. Director Mieras said it was a great point, and the study would look at recovery and be mindful of strategy as they moved forward. Assistant Town Manager Goodman added that Development Services of neighboring cities were Enterprise Funds, and the Town was not interested in exploring that because of flexibility from policy level; she said the Town’s goal was to bring revenues and expenditures in alignment, but not with 100% cost recovery. She said part of the study would identify opportunities to subsidize in some places. Councilmember Bongiovanni said not to focus on cost but that people wanted to do business in Gilbert. Councilmember 15 Koprowski said part of the strategy should be Gilbert was a good place to do business and that there were not many hurdles and delays with projects. Councilmember Buchli said she would like to see the study. Vice Mayor Anderson added that the Town was in the business of creating wealth in the community. Mayor Peterson said Development Services did a great job and asked what the timeline of the study would be. Director Mieras said there was a lot of data from the work done in 2018 and 2019 and estimated until the end of the calendar year. Mayor Peterson asked about changes between 2019-2024. Director Mieras said it would be interesting to see how the paperless changes could be streamlined. Councilmember Tilque said a slow down with the number of projects was impacting revenue and suggested looking long term to not lose incoming developments. Councilmember Bongiovanni said faster service may matter more than cost. Mayor Peterson said speed and customer service were important. Assistant Town Manager Goodman spoke of a developer forum series conducted with the Chamber of Commerce and said overall feedback on the process was positive. She also spoke of key topics captured from feedback received that the department was looking into. There was consensus from the Council for a Development Services Fee Study. 7. Pension Funding Update (PSPRS and ASRS) Office of Budget and Management Director Pfost provided a presentation on the pension system of Arizona State Retirement System (ASRS) and Public Safety Personnel Retirement System (PSPRS. She explained assets, liabilities, and the funded ratio. She discussed the list of pension systems and the participants, structure, and funded status of each. She said ASRS increased in funding ratio and the Town’s portion of the unfunded liability was $94.6 million. She discussed a new funding opportunity to send extra contributions to ASRS for investment returns and the results of the Pension Prefunding Account, adding the Town received about 8.6% annualized interest. She said the pension funding status for PSPRS declined and was 87% funded from the goal of 90% funded. She shared actuarial reports and explained the factors for the decline and funding status. She 16 shared comparisons from other valley cities and said it was similar to other organizations for Police, but not for Fire. She said the total for Police and Fire amounted to $11.5 million dollars to make up the decline and contributed to the Town-paid rates, adding $1.7 million dollars would be added for FY25 Budget to accommodate the rate increases. She discussed the State law funding policy statement and the Town’s strategies for paying down PSPRS Unfunded Liability. She reviewed the recommendations for FY25 to implement strategies into budget which were: send contributions on July 1, remit budgeted amount for employer contributions, do 50% of the under/over from prior year, and budget using the higher contribution rates until the 90% funded goal was reached. She asked the Council for direction on staff moving forward with the recommended strategies to improve PSPRS funding. Councilmember Tilque asked if the Town had 90% funded for ASRS. Director Pfost said they only had the system funding currently. Councilmember Tilque said she wanted consistency for all employees. There was discussion on the over/under ratio and employee contributions rates. Facilitator Lehrman asked if 90% funded was a discretionary choice. Director Pfost said it was a Council-adopted policy and it could be changed, but the Town would ultimately get 100% of the costs. There was consensus from the Council for staff to build the strategies into the FY25 Budget. 8. State Expenditure Limit Discussion and Potential Base Adjustment or Capital Exemption Ballot Issue Director Pfost discussed the State-imposed expenditure limit and said it was an amount calculated by the State, based on population growth and inflation. She explained the reporting requirements and exclusions from the expenditure limit. She discussed the voter- approved options to increase the State expenditure limit and explained the Home Rule Option, Permanent Base Adjustment, Capital Projects Accumulation Fund, One-Time Override, and Emergency Override. She provided the history of the Town’s expenditure limits and discussed consequences and penalty fees for exceeding the limit. She shared 17 other Arizona cities and towns and the State expenditure limit options that they functioned under and discussed their per capita expenditure limit amounts. She explained the process of the four options of the Home Rule, Permanent Base Adjustment, Capital Projects Accumulation Fund, and One-time Override. She discussed the available options for the Council to bond for infrastructure projects and pay interest, ask voters to increase the Expenditure Limit by a One-Time Permanent Base Adjustment or Home Rule, and ask voters to approve the Capital Projects Exclusion. Facilitator Lehrman asked if cities incurred penalties for going over the expenditure limit. Director Pfost said she could not recall which cities had incurred fees, but if they knew they would exceed the limit, they worked with financial advisors for expenditure limit bonds. Councilmember Koprowski said she would want to avoid bonding and paying interest if the Town had cash available to cash fund projects; she recommended asking voters to increase the expenditure limit and approve Capital Projects Exclusion; Mayor Peterson agreed. Councilmember Buchli asked what amount that would be with the one-time Permanent Base Adjustment. Director Pfost said more research was needed to determine, but if matched with Glendale, Arizona, it would be about $3,000 per capita. Councilmember Buchli asked if it would be sufficient in the future. Mayor Peterson said it could be voted on again in the future. Financial Services Officer Wright said the amount would also increase each year by inflation. Councilmember Bongiovanni said voters would see it as a negative thing; Director Pfost said staff would provide factual education and information. Facilitator Lehrman asked if the expenditure limit would be the amount the Town would be able to spend. Director Pfost said the Council would need to approve the budget each year and the expenditure limit was not the Town’s budget. Vice Mayor Anderson asked about the advantage of the Home Rule Option. Director Pfost said it allowed the amount of the preliminary budget to be the expenditure limit for the year; she said she believed the voters would pass that as opposed to the Permanent Base Adjustment. Assistant Town Manager Goodman said the Town did Permanent Base Adjustment in the past and it came down to a local control issue. Councilmember Tilque 18 said her priority was the Permanent Base Adjustment option. She said she was fine with the Capital Project Exclusion, but was concerned with putting two questions on the ballot. There was consensus from the Council to move forward with putting both options for a Permanent Base Adjustment and Capital Project Exclusion on the ballot. 9. Long Range Financial Plan Update Office of Management and Budget Director Pfost discussed stress with Urban Revenue Sharing, stating the State Shared Revenue money received in 2022 was what the Town was getting this year. She said they were expecting about $60 million from 2023 that they would get in FY25. She said if the revenue trend continued, it would be a loss of about $47 million in revenues. She said it was possible people under-collected throughout the year, since it was a new tax system, but there was some stress on the State Shared Revenue. She provided graphs of General Fund Revenues and Expenditures showing numbers including and excluding factors such as lower State Shared Revenue and loss of Food Tax. She discussed delaying projects into the future, which would help Gilbert balance a little longer, but said there was real infrastructure impact. She provided different scenarios and said it had gotten a little worse than the prior years. She discussed wage growth and keeping up with the market. Councilmember Bongiovanni discussed the many variables out of the Town’s control. Mayor Peterson agreed and said to move forward with hope of not losing too much revenue. Councilmember Koprowski asked what they should be thinking about in terms of the ability to get more revenue; the higher Sales Tax could potentially contribute some, but asked about options. Director Pfost discussed the opportunity to grow the tax base and the possibility of a future discussion about Property Tax, then discussed additional pressures from the State and paying attention to legislation. Councilmember Tilque said the group made good decisions that would take Gilbert long into the future, then spoke of the need to keep track of everything. Councilmember Torgeson said salaries were rising so State Shared Revenue should rise; he said to focus on business and bringing money and Sales Tax revenue into the Town. Mayor Peterson discussed the need to stay on top of 19 issues with legislation and the need for lobbying with intergovernmental partners. Town Manager Banger said the Long Range Financial Plan was hard to predict, but was a useful tool and opportunity to try to predict. Councilmember Buchli asked about looking ahead to 2035 and preparing for what was ahead, including effects of Artificial Intelligence (AI). Town Manager Banger said they were always evaluating, and AI would likely touch every line of service. Recap of Topics Town Manager Banger thanked Jennika Horta, Kiersten Begay, Facilitator Lehrman, and the team members who worked on the Retreat. He also thanked all those who presented or compiled the presentation. He acknowledged the Council’s cooperation and understanding of what the Town was facing. He provided the following high-level summary: 1. Quality of Life- preparation for general sales tax increase in all categories of $2 across the board per $100, and raise the Tourism Tax to 5% to match Mesa. 2. Look at options to maintain the Secondary Property Tax rate of $0.98. 3. Prepare a list of the order of project starts and what would move first. 4. Prepare the documents for August and October for a January 1, 2025 increase effective date for Tourism/Bed and Sales/Use Taxes. 5. Begin progress to bring ambulance rates into the next highest billing rate with the Phoenix Metro Rate Group, which would bring Gilbert in line with other cities and continue to not charge for medical supplies. 6. Health Trust would move forward with the plans as designed and do further research into health savings account contributions on behalf of employees, as well as provide information on post-employment/retirement health insurance care for public safety personnel to Councilmember Torgeson. 7. Town services fee schedule evaluation and looking at peer cities and any strategic advantages they could set for the community. 8. Pension funding – continue with approach that was presented to get back to 90% funding level depending on how revenue came in. 20  9. Expenditure limit – proceed with preparation for both options for the ballot for Permanent Base Adjustment and Capital Project Exclusion on the ballot. Councilmember Tilque asked for clarity regarding health insurance and looking at an HSA and a health savings plan. Assistant Town Manager Goodman stated a HDHP had the benefit of being able to start an HSA, and separately they were exploring a LSA, that if not spent, could roll into a retirement plan. Councilmember Bongiovanni said he preferred retreats to be at the Municipal Center I location instead of Southeast Regional Library. ADJOURN The meeting was adjourned at 4:38 p.m. ATTEST: ___________________________ ___________________________________ Brigette Peterson, Mayor Chaveli Herrera, Town Clerk CERTIFICATION I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the special meeting of the Town Council of the Town of Gilbert held on the 11th day of March, 2024. I further certify that the meeting was duly called and held and that a quorum was present. Dated this ____ day of ____________________2024. 21 ___________________________________ Chaveli Herrera, Town Clerk 22