City Commission

NOTICE OF CITY COMMISSION SPECIAL MEETING Budget Work Session May 9, 2024 | 6:00p.m. Royal Oak residents, visitors to the city and vendors with business before the city commission are welcome to attend all public meetings of the city commission or remotely through viewing options listed below. Individuals attending the meetings may participate in public comment when a public hearing is opened for comment; and/or when the member of the public has an agenda item. All individuals wishing to speak will raise their hand and after being recognized by the meeting chair, shall proceed to the lectern unless a physical impairment requires adaptive alternative. They shall state their full name (providing accurate spelling) and state the topic(s) to be discussed. Public comment is welcome for items appearing on the agenda or any matter of city concern. Public comment is made in-person during this portion of the meeting. An individual shall be allowed to speak only once during the public comment portion of a meeting agenda or a public hearing. Speakers shall be limited to a presentation of three minutes. * Additional Information Members of the public shall be allowed exhibits, displays and visual aids which will be used in connection with presentations of agenda items coming before the city commission at their meeting. Any member of the public desiring to distribute support materials shall submit these to the city manager’s office the Friday prior meeting. *Speakers requesting more than three minutes must have such period of time extended by a vote of the city commission. Any member of the public recognized by the meeting chair whose time to comment, or present has expired will be directed by the meeting chair to cease speaking. Should a second request from the meeting chair be required, the speaker shall immediately cease and failing to do so will cause removal of this individual from the meeting.  Agenda Royal Oak City Commission Meeting Thursday, May 9, 2024, 6:00 p.m. City Hall, Room 122 203 S. Troy Street Royal Oak, Michigan 48067 SPECIAL MEETING BUDGET WORK SESSION Anyone planning to attend the meeting who has need of special assistance under the Americans with Disabilities Act (ADA) is asked to contact the city clerk’s office at 248-246-3050 at least two (2) business days prior to the meeting. Pages 1. Call to Order by Mayor Fournier 2. Approval of Agenda 3. Review of Fiscal Year 2024-2025 Recommended Budget 2 Debra Peck Lichtenberg 4. Public Comment 5. Adjournment  CITY COMMISSION AGENDA ITEM TITLE Review of Fiscal Year 2024-2025 Recommended Budget SUBMITTING DEPARTMENT Finance PRESENTER Debra Peck Lichtenberg MEETING DATE May 9, 2024 SECOND READING ☐Yes ☒ No REQUIRED CERTIFIED RESOLUTION ☐Yes ☒ No EXECUTIVE SUMMARY This is the third budget work session for the city commission for the purposes of preparing and reviewing the fiscal year 2024-2025 budget which will be recommended by staff for public hearing and adoption at the May 20, 2024 city commission meeting. Fiscal Impact BUDGET SUMMARY EXPENDITURE REQUIRED Please refer to the budget document AMOUNT CURRENTLY BUDGETED Please refer to the budget document BUDGET AMENDMENT REQUIRED NA FUNDING SOURCE/ GL NUMBER NA WAS THIS A BUDGETED EXPENSE? ☐ Yes ☐ No OTHER FISCAL IMPACTS: (Select all that apply.) ☐No fiscal impact ☒Revenue impact (details below) ☒Workload impact (details below) ☒Operations Impact (details below) REVENUE, WORKLOAD AND OPERATIONS IMPACT: The fiscal year 2024-2025 budget provides the framework for operating the City of Royal Oak government which provides all services for the community. The ability to collect taxes and fees; to employ and conduct city services; to pay for material needs and service in the conducting of city services, all center on the budget. ALIGNMENT WITH COMMISSION APPROVED PLANS, POLICIES, AND PROGRAMS Please refer to the budget document for specific references to strategic, older adults | aging in place, and sustainability climate action plans. Page 2 of 68 COMMUNITY ENGAGEMENT Three budget work sessions will have been conducted. All were public meetings with notice to the public being provided on the city’s website; meeting information included in the weekly eBlast communications, and agendas displayed in the lobby at city hall. The public hearing will also be noticed to the public using these three methods, in addition to the notice published in the newspaper. BOARD AND COMMISSION FEEDBACK Boards, commissions, and committees are able to provide feedback through their staff liaisons and each department has met separately with the city manager and finance department to present their recommendations. LEGAL COMMENTS ATTACHMENTS: May 9, 2024, Presentation of Budget Overview Page 3 of 68 CITY COMMISSION MAY 9, 2024 - BUDGET STUDY SESSION BUDGET, TAX RATES AND WATER RATES FOR FISCAL YEAR 2024-2025 Page 4 of 68 1 BUDGET OVERVIEW Page 5 of 68 2  KEY GOALS: INTERIM 1. ADVANCE HIGH-PRIORITY INITIATIVES CITY MANAGER’S 2. COMMITMENT TO RELIABLE INFRASTRUCTURE LETTER OF 3. BUILD AND ENHANCE COMMUNITY AMENITIES TRANSMITTAL 4. ENHANCE COMMUNICATIONS 5. ACHIEVE LONG-TERM FISCAL HEALTH Page 6 of 68 3  Staffing:  No new positions are included in the proposed budget. Staffing What’s levels are maintained at status quo. new? Capital:  Proposed budget includes over $30.3 million funding for investments in the City’s infrastructure, parks, buildings and other long-lived assets. Operational:  Proposed budget focuses on maintaining the City’s daily operations at the current levels, while also providing funding for facility use and operational studies that will evaluate the effectiveness of the current operating structure and opportunities for service expansion and improvements. Page 7 of 68 4  “High Impact” Issues: General Fund and Public Safety Fund  Administration  The Administration budget includes the revenue sharing payments to MPS related to parking ticket violation revenue. The portion related to fees paid for metered parking sessions is recorded in the Auto Parking Fund.  Streetlighting  Conversion to LED is estimated to reduce energy costs $336,750 in 2024-25  Transfers Out  The most significant expense of the General Fund is the transfer out to support the Public Safety Fund, since the public safety millage only covers a portion of the total costs. Under the current funding scenario, the Public Safety Fund is not sustainable without these annual transfers from the General Fund. These two funds must be combined to produce a more meaningful reporting of this cost relationship.  The 2024-25 budget also includes a $500,000 transfer to the Auto Parking Fund (related to parking ticket revenue) and $150,000 to Senior Service Fund to supplement the tax levy funding. Page 8 of 68 5  “High Impact” Issues Recreation Fund (p. 267-272)  Continues to have a net operating deficit  As part of the overall review of operations, consideration should be given to the true cost of the preschool program and whether it should be continued in the current format, modified, or discontinued. Auto Parking Fund (p. 273-278)  Net revenue under MPS agreement is lower than pre-COVID levels  Parking meter rates may need to be revised  Parking structure rates may need to be revised; return to flat rate after 5:00p.m. or other changes  Parking Fund cannot meet debt payments and covenants without General Fund support—even in excess of increased ticket revenue  Relying on DDA compliance with loan agreements to assist with debt in excess of the amount historically contributed  Capital Projects: The older structures and surface lots are in need of significant improvements; newer structures must be maintained to ensure customer safety and security. Page 9 of 68 6  “High Impact” Issues Water & Sewer Fund (p. 283-300)  Water usage levels have declined significantly in recent years, due to high-efficiency appliances and consumer conservation efforts  Water rate structure is almost entirely variable in nature, while City costs are largely fixed  This puts all “risk” on the City and does not accurately charge current users for the cost of providing their service  Shift to a “ready-to-serve” flat fee plus a variable usage fee is a more typical format  Capital Projects: Aging infrastructure requires significant proactive maintenance and replacement; 2024-25 Budget includes $6,381,000 in system improvements. An additional $650,000 is budgeted for sewer televising and root control and sewer asset management planning, along with an additional $1,290,000 for mandated lead water service line replacements and $445,750 for water service line inventory. TOTAL = $8,766,750 Ice Arena Fund (p. 301-304)  Continues to have a net operating deficit  Capital Outlay – facility has a significant amount of deferred maintenance and is in need of significant improvements; over $1 million of capital improvements are needed over the next 5 years Page 10 of 68 7 Other Items of Note…  Golf course management contract is up for renewal.  State Construction Code Fund (p. 232-235) continues to accumulate fund balance.  ROOTS Fund (p. 237-238) reflects the $250,000 Erb Family Foundation Grant and the costs of the Arboretum project, spread equally over 2023-24 and 2024-25.  Senior Services Fund (p. 240-245) update on status of spending the $300,000 set aside in General Fund assigned fund balance as part of the 2023-24 budget adoption.  Animal Shelter Fund (p. 246-249) is held at “status quo” and continues operating costs at historic levels. If the shelter facility is moved or modified, the budget will need to be amended to reflect the expected change in costs.  Miscellaneous Grant Fund (p. 252-253) was the holding fund for the ARPA funds, the remaining ARPA funds have been reallocated to the ARPA Enabled Capital Projects Fund. Page 11 of 68 8 Staffing Levels Based on Home-Base Allocations, not FTEs Function 2003-04* 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 District Court 23 29 29 30 30 30 30 34 36 36 Administrative 85 71 76 79 78 81 81 81 83 83 Services Library 15 8 8 9 9 9 13 15 17 17 Public Safety 195 154 154 154 154 154 154 162 163 163 Recreation & Public 90 59 63 63 63 65 69 70 71 71 Services Total 408 321 330 335 334 339 347 362 370 370 Other items to note: Berkley Court merged to form 44th District Court in 2015, resulting in added staffing; Recreation & Public Services has contracted out management of Farmers’ Market, Ice Arena, Parking, and Golf Course since 2003-04. Page 12 of 68 *2003-04 fiscal year was the highest staffing level since 2000; Information provided for reference. 9 Requests for New Positions NONE Included in the Proposed Budget Department Position(s) Requested Reason for not including at this time Recreation Recreation Coordinator Defer pending recommendations from upcoming operational (convert part-time position to full-time) review of the Department of Public Services and Recreation is completed. Recreation Preschool Teacher Defer pending recommendations from upcoming operational (convert part-time position to full-time) review of the Department of Public Services and Recreation is completed. Senior Services Chef/Baker Defer pending recommendations from upcoming operational (convert part-time position to full-time) review of the Department of Public Services and Recreation is completed. Parking Parking Systems Manager Due to current funding shortfalls in the Auto Parking fund, defer (convert part-time position to full-time) converting this position to full-time until the Infrastructure Committee of the DDA impact of recent changes to the MPS Parking System is better known. Total 4 denied positions Page 13 of 68 10 Capital Improvement Plan (CIP) The CIP is a planning tool, with a goal to identify and schedule capital improvements for fiscal years ending 2025‐2030. The CIP is incorporated within the City’s proposed budget document for fiscal year 2024‐2025, along with specific recommendations for funding of these projects. Funding and Forecasts-- The identified capital projects currently exceed the City's financial resources. Certain items requested for FY 2024-25 have not been recommended for funding due to these limitations. The future year financial forecasts contain reasonable estimates of the funding that The full CIP document is included as the may be available, which is generally less than the requests in the Appendix in the budget document, Beginning on p. 425 CIP document originally presented to the Planning Commission. Page 14 of 68 11 Capital Outlay Recommendation Project Type Total Requested Funded Partially Funded Not Funded Water & Sewer $16,159,750* $6,441,750 $2,325,000 $7,393,000 (*Total requested increased $907,000 due to recent bid results) Sidewalks $100,000 $100,000 - - Local Streets $6,619,000 $6,519,000 - $100,000 Major Streets $7,965,000 $7,235,747 - $729,253 City-Owned Facilities $6,396,162** $3,651,162 $25,000 $2,720,000 (**Total requested increased $50,235 due to recent bid results) Parks & Grounds $3,145,000 $1,085,000 $280,000 $1,780,000 Information Technology $364,300 $364,300 - - Vehicles/Equipment/Large Studies/Other $2,285,417 $2,285,417 - - Total - adjusted $43,034,629 $27,682,376 $2,630,000 $12,722,253 Page 15 of 68 12  Revenue:  Property Taxes +4.0%  State Shared Revenue +3.0%  Interest +1.0%  Charges for Services +5.0% “Global” Personnel: Budget and  Salaries & Related Benefits +4.0% Forecast  Health Insurance +5.0%  Retirements – Pensions/OPEB +5.0% Assumptions Other Expenditures:  Electricity +5.0%  Other Utilities +3.0%  Construction Supplies +10.0%  Other General Expenditures +2.0% - 5.0% Budget book p.31-32 Page 16 of 68 13 TOP LEVEL SUMMARY Page 17 of 68 14  General Fund Anticipated Use of Fund Balance = $2,691,379 REVENUE = $49,069,910 EXPENDITURES = $51,761,289 Taxes, Transfer Out , $29,032,100, 59% $27,518,300, 53% Operating & Supplies, $7,917,354, 15% Licenses, Charges Other, & Fines, $361,750, 1% $9,913,900, 20% Capital, $1,165,000, 2% Interest & Contributions, Debt Service, Transfers, $2,458,810, 5% Personnel, $1,060,280, 2% $787,000, 2% Grants, $7,914,880, 16% $12,701,825, 25% Page 18 of 68 Budget book p. 62-64 15  General Fund and Public Safety Fund Combined (Interfund Transfer activity totaling $24.5M eliminated) Anticipated Combined Use of Fund Balance = $3,534,001 REVENUE = $64,959,580 EXPENDITURES = $68,493,581 Licenses, Charges & Fines, $11,508,200, 18% Debt Service, $6,218,910, 9% Personnel, $44,110,495, 64% Capital, $1,748,417, 3% Grants, $8,052,380, 12% Transfer Out , $3,018,300, 4% Transfers, $1,427,000, 2% Taxes, $42,227,680, 65% Operating & Interest & Contributions, Supplies, $1,253,280, 2% $13,397,459, Other, 20% $491,040, 1% Page 19 of 68 Budget book p. 188-190 16  General Fund and Public Safety Fund Combined (interfund transfers eliminated) $100,000,000 $80,000,000 Forecast $60,000,000 General Fund and Public Safety Fund $40,000,000 $20,000,000 Cumulative impact on $- combined fund balance 2023-2029: $(20,000,000) 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 = $ (26,766,384) Projected Budget Forecast Forecast Forecast Forecast Revenue $75,538,628 $64,959,580 $67,010,830 $69,147,900 $71,373,450 $73,690,420 Expenditures $86,542,881 $68,493,581 $70,365,810 $72,012,350 $74,302,420 $76,770,150 Net Rev > Exp $(11,004,253 $(3,534,001) $(3,354,980) $(2,864,450) $(2,928,970) $(3,079,730) Page 20 of 68 Budget book p. 344 17  All Appropriated Funds Combined (General & Special Revenue Funds only – includes interfund activity) Anticipated Use of Fund Balance, net of anticipated increases – All General & Special Revenue Funds Combined = $5,141,821 REVENUE = $142,739,019 EXPENDITURES = $147,880,840 Capital, Transfer Out , Taxes, Licenses, Charges $17,442,556, 12% $36,776,890, 25% $70,260,780, 49% & Fines, $14,363,700, 10% Debt Service, $7,348,540, 5% Grants, Other, $19,452,460, 14% $617,040, 0% Operating & Personnel, Supplies, Interest & $53,167,120, 36% $33,145,734, 22% Contributions, Transfers, $3,128,868, 2% $34,916,171, 25% Page 21 of 68 Budget book p. 22-24 18 Forecast All Appropriated Funds Combined (General Fund and Special Revenue Funds ONLY) $180,000,000 All Appropriated Funds Combined (no elimination of interfund transfers) $160,000,000 $140,000,000 $120,000,000 Cumulative impact on combined $100,000,000 fund balance 2023-2029: $80,000,000 = ($13,441,244) $60,000,000 $40,000,000 $20,000,000 2023-24 Projected includes a transfer out of $- $21,729,082 to create the ARPA Enabled Capital Projects Fund. This new fund is not $(20,000,000) part of the data included in this chart, $(40,000,000) therefore the transfer in is not part of revenue 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 Projected Budget Forecast Forecast Forecast Forecast here. Excluding that transfer, the Cumulative Revenue $145,300,835 $142,739,019 $142,589,595 $147,415,375 $152,663,510 $157,102,295 impact on combined fund balance 2023-2029 Expenditures $159,749,779 $147,880,840 $142,712,474 $146,361,757 $150,087,141 $154,459,882 an increase of $8,287,838. Net Rev > Exp $(14,448,944) $(5,141,821) $(122,879) $1,053,618 $2,576,369 $2,642,413 Page 22 of 68 Budget book p. 22-24 19  ALL Funds Combined (includes interfund activity) REVENUE = $252,803,071 EXPENDITURES = $256,260,643 Operating & Supplies, Taxes, $100,306,826, 39% Licenses, Charges $70,463,780, 28% & Fines, $88,018,202, 35% Personnel, $68,370,450, 27% Other, $27,728,140, 11% Debt Service, $12,022,940, 5% Transfer Out , Interest & $42,850,671, 17% Contributions, Transfers, Grants, Capital, $4,213,818, 1% $42,850,671, 17% $19,528,460, 8% $25,960,356, 10% Depreciation, $6,749,400, 2% Page 23 of 68 Budget book p. 330-331 20 PROJECTED FUND BALANCES RESERVE TRENDS AND RAINY-DAY FUNDS REVIEW FUND BALANCE POLICY Page 24 of 68 21  Fund Balance Policies As reaffirmed by Commission on May 22, 2023 The current policies include: General Fund: Unassigned FB maintained between 10-25% of budgeted expenditures Non-Major Enterprise Funds: Transfers to the General Fund cannot reduce the net non- capital assets by more than 20 percent in any fiscal year* Auto Parking Enterprise Fund: Transfers to the General Fund cannot reduce the net non- capital assets by more than 20 percent in any fiscal year* State Construction Code Fund: Unassigned FB shall not be less than 50% of budgeted expenditures *The only anticipated transfers to the General Fund are from the DDA (not an enterprise fund) and the direct reimbursement of Arts, Beats & Eats expenditures incurred by the General Fund; Fund Balance Policy conditions are met for these items. Page 25 of 68 Budget book p. 408 22  General Fund Balances and Reserves as a % of Budgeted Expenditures (Top section includes forecast assumption of $1 million per year in capital outlay) Page 26 of 68 Budget book p. 344 23  General Fund and Public Safety Fund Combined Fund Balances and Reserves (interfund transfers eliminated) as a % of Budgeted Expenditures Page 27 of 68 Budget book p. 344 24  Elections – Passage of Proposal 22-2 mandating multiple drop boxes, early voting, What has prepaid postage on all ballot materials, etc., also requires additional staffing. contributed to Engineering and Capital Costs – Costs of materials and labor has increased declining significantly. On construction projects, we typically spend the most money on General Fund concrete, asphalt and ductile iron water main, however, almost all pay items are increasing as well. As an example: fund balance? A few examples… Technology – Criminal Justice system requirements have added ~$50,000/yr. Adding public WiFi in multiple city buildings and parks has added $30,000/yr. Supply chain issues during COVID increased hardware costs. Page 28 of 68 25  Police: Technology • Axon Products What has o o Body worn cameras, In car videos, Tasers, Interview room recording system, cloud based digital evidence storage. These products offer transparency and add a less lethal use of force option. contributed to o In 2019, the cost of this 5-year subscription was just over $1 million. o In 2023, we added equipment to outfit all supervisors, detectives, and plain clothes officers for $134,500 over 5 years. o Now, all staff has access to BWC and less lethal use of force options while working mandatory uniform events such as the Woodward declining o o Dream Cruise and Arts, Beats, and Eats. Axon equipment and services have increased from $1.2 Million to $1.8 million compared from 2019 to now. The current contract expires at the end of 2024; renewal costs will be approximately $1.8 million for the year 2025 – 2030. General Fund • Added Services Crisis Intervention Team (CIT) fund balance? o o o This program certifies police officers in mental health response. To become certified, a police officer must attend 40 hours of training. This training removes them from patrol duties and must be backfilled with overtime. o Currently, we have 22 CIT certified police officers and seeking to increase the team. • Co-responder program (CORE) o The co-responder program is new and was created in 2024. o This program partners mental health clinicians with patrol officers who co-respond to those experiencing a mental health crisis. o Collaboration between Oakland Community Health Network and four communities: Royal Oak, Madison Heights, Ferndale, & Hazel Park. o The cost of this innovative program is $120,000 per year per municipality. A few examples… • Staffing at Special Events o The number of special events continues to increase with two events requiring all sworn staff to work Mandates • Emergency Medical Dispatch (EMD) o EMD was added during 2024. o This technology and training are mandated by the Oakland County Medical Control Authority. o The initial cost of the software was $50,000, plus $5,000 annual costs. o All staff, including new 911 dispatchers as they are onboarded, must be trained in EMD. • Accreditation o Although not mandated yet, being accredited through the Michigan Association of Chiefs of Police is a law enforcement best practice. o The standards require continual training in De-escalation, Use of Force, Active Assailant, Critical Incident Stress Management, Mental Health Response, Biased Influence Policing, Ethics, and many others. o Staying current on required training now comes at a significant cost. Page 29 of 68 26  Fire & Ambulance: What has • EMS equipment service costs $1.2 million over next 5 years, as contributed to proposed declining • Ensures Royal Oak has latest, cutting edge medical equipment responding to residents. General Fund • Includes equipment replacement - costs just for Life packs is going from $45K to $60k/each. fund balance? • Addition of a third daily staffed ambulance at Rochester Rd Station #3 which adds response capacity for City residents • Increase in number of personnel (7) – Six are to staff the 3rd A few examples… ambulance and One added to expand inspection abilities • Equipment costs increasing between 3%-20% annually • Apparatus costs went from roughly $500,000 to over $700,000 for pumpers and from $1,000,000 to $1,400,000 for engines in recent years. • PPE costs for firefighters have increased from $4k per firefighter to over $6k. Page 30 of 68 27  Transfer in of over $4.5 million in ARPA grant funding for general operations. What has Passage of new millages to help fund Parks, slowed the Forestry, Animal Shelter, and Senior Services. decline? High CPI index levels produce higher than average property tax revenue increases. Difficulty in filling certain positions – especially in A few key items… Public Safety, resulting in artificially low personnel costs. Increase in interest rates resulting in higher investment returns. Funding from the State of Michigan has increased over recent years, although the trend is not predicable. Page 31 of 68 28  Examples of major swings in the General Fund (GF) forecast: In 2021-22: Role of the + State Shared Revenue exceeding original SOM estimates + Increases in parking violation revenue from MPS system Forecast - Decrease in Court revenue & parking violations + Police/Fire vacancies reduced GF transfer + GF personnel vacancies in various departments (Code Enforcement, Court, Economic Development, Building Maintenance, Attorney, HR, etc.) + Capital Projects delayed or canceled Why have the actual results typically been more positive + Contracted Services delayed or canceled (Master Plan update, election tabulator maintenance, etc.) than the forecast? - Revenue sharing with MPS, per contract (offset to revenue increase above) - Added Winter Blast sponsorship Forecasts alert us to what the financial future may be, if no changes in our path is made. Overall impact = $2,327,025 improvement over original budget But we use this information to MAKE changes, therefore, we can often Budgeted loss = ($8,078,030), Actual loss = ($5,751,005) improve the outcomes. Page 32 of 68 29  Examples of major swings in the General Fund (GF) forecast: In 2022-23: Role of the + Voters approved new Parks millage – first levied Winter 2022 tax bill (added $2.2M) + State Shared Revenue exceeding original SOM estimates Forecast + Interest rates increased, earning more income on higher cash balances from ARPA transfer + Additional ARPA funding recognized in GF + Better than expected Court revenue (budget decreased due to prior year shortfalls) - While MPS parking violations increased, the revenue fell short of budget Why have the actual results expectations typically been more positive + GF personnel vacancies in various departments (Court, Economic Development, than the forecast? Treasury, Clerk, Assessing, etc.) + Contracted Services delayed or canceled (Renewable energy/facility study, etc.) - Increased capital outlay for unanticipated purchases Forecasts alert us to what the financial future may be, if no changes in our - Increased utility costs for water (splashpads/water features in parks) & electricity path is made. - Added Ice Rink sponsorship But we use this information to MAKE changes, therefore, we can often improve the outcomes. Overall impact = $3,351,770 improvement over original budget Original Page Budget = ($222,170), Actual Result = $3,129,600 33 of 68 30 TRENDS IN PROPERTY TAXES HISTORICAL VIEWS OF PROPERTY VALUES, MILLAGE RATES, AND STATUTORY LIMITATIONS Page 34 of 68 31  History of Assessed vs. Taxable Values Current Value of 1 mill of tax levy = Approx. $3,895,000 $6,000,000,000 $4,779,249,510 $5,000,000,000 Average annual increase in AV = 4.54% $4,000,000,000 $3,000,000,000 $3,895,551,960 $2,000,000,000 $1,436,146,327 Average annual increase in TV = 3.85% $1,000,000,000 $1,371,769,014 $- 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 TOTAL ASSESSED TOTAL TAXABLE Page 35 of 68 Budget book p. 367 32  History of City Millage Rates 20.0000 18.0000 16.0000 14.0000 12.0000 10.0000 8.0000 6.0000 4.0000 2.0000 - 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 OPERATING REFUSE PUBLICITY DEBT VOTED (end 2001) REFUSE VOTED FIRE (2002-22) LIBRARY (2004) PUBLIC SAFETY (2013) ROADS (2015, 2024) DRAIN (2019) PARKS (2023) SENIOR SERVICES (2023) TOTAL CITY MILLAGES Page 36 of 68 Budget book p. 370 33  Home Value for a Long-time Resident Based on a home valued at $300,000 TCV in 1998, with no change in ownership $1,000,000 Increase from 1998 to 2025: TRUE CASH VALUE (TCV) , TCV = 206% $918,273 $900,000 SEV = 206% $800,000 TV = 91% $700,000 $600,000 $500,000 SEV, $459,137 $400,000 $300,000 $300,000 $200,000 $150,000 TAXABLE VALUE , $286,236 $100,000 $- 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 TAXABLE VALUE GAP TRUE CASH VALUE (TCV) SEV Page 37 of 68 34  Tax Bill Impact – City Millage Rates For a resident with a home worth $300,000 true cash value in 1998 TOTAL CITY TAX BILL ESTIMATE $6,000.00 $5,000.00 $4,000.00 $3,000.00 $2,000.00 Cost of 1 mill of tax levy to this resident = Approx. $1,000.00 $286/year (Current Value of 1 mill of tax levy to the City = Approx. $3,895,000) $- 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Starting with a home valued in 1998 at $300,000 – taxable value of $150,000 at a millage rate of 13.3315 – tax = $1,999.73 In 2025, the same home (capped) is valued at $918,273 – however, taxable value is only $286,236, with millage rate of 17.2498 – tax = $4,937.51. This is an average increase of ~3.8% per year. Page 38 of 68 35  Tax Bill Impact –Millage Rate vs. TV Changes For a resident with a home worth $300,000 true cash value in 1998 $6,000.00 ~77% of the increase in the tax bill from 1998 to 2025 is due to increased value of the home. Only ~23% of the increase is due to millage rate changes. $4,937.51 $5,000.00 $1,154.70 $4,000.00 $3,000.00 $1,999.73 $2,000.00 $- $3,782.81 $1,000.00 $- 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 TV changes; No change to 1998 millage rate Due to change in millage rates TOTAL CITY TAX ESTIMATE Page 39 of 68 36  Millage 2023-24 2024-25 Change Millage Rates Proposed Millage Rates PROPOSED CITY Operating 6.8118 6.7900 (0.0218) Refuse 1.8571 1.8512 (0.0059) MILLAGE RATES Refuse – Voted 0.5000 0.5000 - FOR 2024-25 Publicity 0.0134 0.0128 (0.0006) Library - Voted 1.0000 0.9968 (0.0032) Public Safety - Voted 3.6615 3.6498 (0.0117) Roads – Voted (2023) 2.3026 2.5000 0.1974 Headlee Rollback Factor = 0.9968 Senior Services – Voted 0.2000 0.1994 (0.0006) CPI Inflation Factor (Headlee) = 5.1% Parks - Voted 0.7000 0.6978 (0.0022) Proposal A Limited CPI Factor = 5% Drain Bonds - GWK 0.5723 0.0520 (0.5203) Total 17.6187 17.2498 (0.3689) DDA 1.6003 1.5951 (0.0052) Page 40 of 68 37 Millage Rate Comparison Blue bar represents a bordering neighbor Average Millage Rate = 18.1757 Note: The City of Royal Oak’s millage rate is for fiscal year 2024-25, however the rest of the community’s rates are from 2023- 24 as they were not available for the upcoming fiscal year as of the date of this publication. Page 41 of 68 38 Where does my tax dollar go? For every tax dollar collected, only $0.45 stays with the City of Royal Oak. The remaining $0.55 are distributed to other taxing authorities, including schools, OCC, Oakland County and various other agencies. Schools – K-12 $0.36 City of Royal Oak $0.45 Page 42 of 68 39  …and how is that 45 cents used? Total of $0.45 of each tax dollar retained by City Of the $0.45 of each tax dollar retained by the City, $0.27 is from dedicated millages that can only be used for the specific purpose approved by the voters. The remaining $0.18 of City Operating millage is unrestricted and can be used for general City operations. The remaining $0.06 is used to fund these How the $0.18 of City Operating millage is allocated… general government support services: Mayor / Commission City Clerk District Court Human Resources City Manager Administration Elections Treasury Finance City Office Building Assessing Building Maintenance City Attorney Community Engagement Page 43 of 68 40 WATER & SEWER RATE SETTING HISTORICAL VIEWS OF WATER USAGE, RATES, AND PROPOSED RATE IMPACT Page 44 of 68 41 Declining Water Usage Units Purchased vs. Units Billed 375,000,000 355,000,000 335,000,000 315,000,000 Water Loss = Difference between the water units purchased 295,000,000 and the water units billed 275,000,000 255,000,000 235,000,000 215,000,000 195,000,000 175,000,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Water Units Purchased (cu. ft.) Water Units Billed (cu. ft.) Page 45 of 68 42  Usage Shortfall Actual Billed Compared to Usage Budgeted in Establishing Rates Actual vs. Budgeted Units Billed Annual Difference between and Cumulative Shortfall Actual Units Billed and 350,000,000 30,000,000 Budgeted Units used for Rate Setting 300,000,000 20,000,000 250,000,000 10,000,000 - 200,000,000 (10,000,000) 150,000,000 (20,000,000) 100,000,000 (30,000,000) 50,000,000 (40,000,000) - 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Water Units Billed (cu. ft.) Budgeted Units used for Rate Setting Cumulative Shortfall in Budgeted Usage Page 46 of 68 43  Average Quarterly Bill over time Quarterly Bill based on Static Usage and Average Usage over time 2.0% = Average annual $400.00 increase for the average user whose use is declining over $350.00 the 15-year period, as shown. No change in usage over $300.00 time Change in consumer usage $250.00 over time reflected. $200.00 $150.00 $100.00 $50.00 $0.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Flat Rate $10.25 $10.25 $10.25 $10.25 $10.25 $10.25 $10.25 $10.75 $10.75 $11.25 $11.25 $11.25 $12.00 $13.00 $14.00 $15.00 Usage Fee $180.18 $174.67 $176.35 $231.93 $227.10 $222.14 $218.99 $207.70 $256.25 $273.35 $270.07 $218.33 $212.03 $199.52 $214.96 $233.66 Usage Rate $6.50 $7.00 $7.50 $9.20 $9.50 $9.50 $9.60 $9.88 $11.75 $12.14 $12.31 $10.55 $10.89 $11.09 $11.29 $11.75 Average Qtrly Usage 27.7 25.0 23.5 25.2 23.9 23.4 22.8 21.0 21.8 22.5 21.9 20.7 19.5 18.0 19.0 19.9 Average Quarterly Bill $190.43 $184.92 $186.60 $242.18 $237.35 $232.39 $229.24 $218.45 $267.00 $284.60 $281.32 $229.58 $224.03 $212.52 $228.96 $248.66 Quarterly Bill based on 27.7 units $190.43 $204.29 $218.14 $265.27 $273.58 $273.58 $276.36 $284.51 $336.51 $347.79 $352.36 $303.69 $313.86 $320.41 $326.95 $340.70 Page 47 of 68 44  Impact of Capital Outlay swings on Average Billing $8,000,000 $300.00 $7,000,000 $250.00 $6,000,000 $200.00 $5,000,000 $4,000,000 $150.00 $3,000,000 $100.00 $2,000,000 $50.00 $1,000,000 $0 $- 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Capital Outlay Average Quarterly Bill When adequate reserves exist, rates can be increased slowly over time to meet capital improvement needs, rather than needing to increase sharply in years of higher capital project activity. Page 48 of 68 45 Proposed Water & Sewer Rates effective for billings after July 1, 2024 Page 49 of 68 46 Impact of Proposed Water & Sewer Rates at various usage levels Page 50 of 68 47 BUDGET RESOLUTION AND POLICIES Page 51 of 68 48 Resolutions To Be Adopted  Resolution One: Budget Resolution  Includes adoption of budget for the General Fund and the 17 Special Revenue Funds  Resolution Two: Set Tax Rates  Establishes all millage rates to be levied in the fiscal year 2024-25  Resolution Three: Authorize Tax Administrative Fee  Authorizes the City to include a 1% administrative fee to offset the cost of creating and administering tax bills on behalf of the City and other taxing agencies  Authorizes the City to charge late payment penalties  Resolution Four: Water and Sewage Disposal Rates  Establishes the rates to take effect for bills issues on or after July 1, 2024  Resolution Five: Purchases  Authorizes administration to pay certain utility and regulated monopoly invoices prior to Commission approval, when necessary Page 52 of 68 49 Resolutions To Be Adopted (continued)  Resolution Six: Purchasing  Establishes purchasing threshold and guidelines  Resolution Seven: Transfer  Gives authority to Finance Director for administrative transfers with appropriation levels and between Major and Local Street funds  Resolution Eight: PEG Fees  Allocates a portion of PEG fees collected to Community Media Network  Resolution Nine: Financial Policies  Reaffirm the following policies:  Attrition  Investments  Retirement Contributions  Debt Management  Capital Assets and Capital Improvement Projects  Fund Balances  Self-Supporting Funds Page 53 of 68 50 Questions? Comments? Thoughts? Page 54 of 68 51 CITY COMMISSION MAY 20, 2024 BUDGET PUBLIC HEARING AND ADOPTION, INCLUDING GENERAL APPROPRIATIONS ACT FOR FISCAL YEAR 2024-2025 Page 55 of 68 52  Coming Soon… Page 56 of 68 53  More details from the budget work sessions held January 29th, Thank you! February 29th and May 9th are available on the City’s website. Page 57 of 68 54 Page 58 of 68 55 ADDITIONAL BACKUP Page 59 of 68 56  DO NOT USE DISCARDED SLIDES TO FOLLOW Page 60 of 68 57  Link Between Planning Commission Approval and funding The Planning Commission approves the projects included in the CIP for viability and compliance with the Master Plan. An estimated time frame is included with that document. As the financial budget process moves forward, the planned date for the completion of certain projects may be shifted from the dates presented to the Planning Commission. This is part of the “funding” process and allows for the best alignment of project timing with the available resources throughout the forecast period. All projects from the “Recommended Capital Improvement Plan” document continue to be included, however, these projects are proposed to be funded in a different fiscal year than originally presented: Page 61 of 68 58 Capital Project Requests TOTAL PROJECT VALUE BY PRIMARY STRATEGIC GOAL ALIGNMENT PROJECT INCEPTION TO FY 2028-29 TOTAL = $170,678,459 Budget Forecast Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Total 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 Welcoming, Engaged, and Livable Community,… Water & Sewer $7,384,250 $7,871,250 $6,735,500 $5,824,000 $6,561,000 $6,698,000 $41,074,000 Safe, Healthy, and Just Sidewalks $97,050 $100,200 $103,450 $552,550 $1,000,000 $1,000,000 $2,853,250 City, $3,917,700, 2% Local Streets $9,893,700 $6,378,500 $2,334,900 $1,936,400 $725,400 $580,500 $21,849,400 Environmental Major Streets $6,293,673 $5,481,199 $6,287,199 $7,028,300 $6,939,500 $7,762,800 $39,792,670 Leadership, City-owned $5,442,000, 3% $1,293,500 $1,654,000 *$935,000 *$1,850,000 *$100,000 *$0 *$5,832,500 Facilities* Parks and Grounds $834,375 $3,610,000 $4,910,000 $4,560,000 $3,610,000 $3,200,000 $20,724,375 Efficient and Effective Information Services, $331,000 $316,000 $316,000 $316,000 $316,000 $316,000 $1,911,000 Technology $14,876,772, 9% Vehicle/Equipment $2,466,373 $2,191,900 $2,240,070 $2,138,367 $2,439,458 $1,523,804 $12,999,972 /Lg. Studies/Other Total $28,593,921 $27,603,049 $23,862,119 $24,205,617 $21,691,358 $21,081,104 $147,037,167 BY PRIORITY LEVEL: Essential/Mandated $3,102,473 $1,031,700 $815,200 $748,800 $752,500 $756,300 $7,206,973 Important $21,413,873 $20,967,850 $14,616,420 $16,425,817 $18,491,358 $20,163,804 $112,079,112 Value Added $117,000 $0 $200,000 $1,300,000 $0 $0 $1,617,000 Desired $3,960,575 $5,603,499 $8,230,499 $5,731,000 $2,447,500 $161,000 $26,134,072 Reliable Infrastructure, $127,735,987, 75% Total amount funded in proposed 2023-24 Budget = $28,593,921. Page 62 of 68 59 Page 63 of 68 60  Impact of Various Levels of Capital Outlay on General Fund Unassigned Fund Balance, as a % of Total Expenditures 30.0% 20.0% Unassigned Fund Balance as a % of Expenditures 10.0% 0.0% FUND BALANCE POLICY MAXIMUM -10.0% FUND BALANCE POLICY MINIMUM $0 CAPITAL OUTLAY -20.0% ONLY ESSENTIAL/MANDATED ESSENTIAL/MANDATED + $500K IMPORTANT ESSENTIAL/MANDATED + ALL IMPORTANT -30.0% ESSENTIAL/MANDATED + IMPORTANT + VALUE ADDED ALL CAPITAL OUTLAY PRIORITIES -40.0% 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 FUND BALANCE POLICY MAXIMUM 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% FUND BALANCE POLICY MINIMUM 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% $0 CAPITAL OUTLAY 24.6% 19.7% 17.2% 11.8% 6.2% 0.1% ONLY ESSENTIAL/MANDATED 24.6% 19.4% 17.0% 11.5% 5.9% -0.1% ESSENTIAL/MANDATED + $500K IMPORTANT 24.6% 18.2% 13.5% 7.7% 2.0% -4.4% ESSENTIAL/MANDATED + ALL IMPORTANT 24.6% 18.2% 9.1% -1.0% -12.2% -23.6% ESSENTIAL/MANDATED + IMPORTANT + VALUE ADDED 24.6% 17.9% 8.9% -1.5% -12.7% -24.1% ALL CAPITAL OUTLAY PRIORITIES 24.6% 17.3% 5.4% -8.7% -21.3% -32.8% Page 64 of 68 61  Senior Services Fund Revenue History, Budget & Forecast $1,500,000 $1,300,000 $1,100,000 $900,000 $700,000 $500,000 $300,000 $100,000 $(100,000) 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 2026-2027 2027-2028 TRANSFERS FROM OTHER FUNDS $- $250,000 $250,000 $350,000 $350,000 $397,870 $350,000 $350,000 $350,000 $321,800 $500,000 $350,000 $- $- $- $- $- DONATIONS, INTEREST & MISC. $152,296 $164,204 $204,844 $212,860 $154,066 $193,953 $187,880 $193,828 $185,953 $210,831 $168,315 $208,320 $207,930 $214,136 $220,527 $227,110 $233,890 FEES FOR SERVICE $231,097 $249,492 $257,738 $226,594 $238,592 $256,744 $237,938 $239,501 $157,631 $55,902 $189,350 $246,100 $247,400 $252,348 $257,395 $262,543 $267,794 PROPERTY TAX REVENUES $- $- $- $- $- $- $- $- $- $- $- $620,000 $670,200 $693,657 $717,935 $743,063 $769,070 TOTAL REVENUES $383,393 $663,696 $712,582 $789,454 $742,658 $848,567 $775,818 $783,329 $693,584 $588,533 $857,664 $1,424,420 $1,125,530 $1,160,141 $1,195,857 $1,232,716 $1,270,754 Page 65 of 68 62  Senior Services Fund History of Revenue & Spending, including Budget & Forecast $1,600,000 2020-21 spending $1,400,000 includes capital outlay of $1,200,000 $274,487 $1,000,000 $800,000 $600,000 $400,000 $200,000 $- 2011- 2012- 2013- 2014- 2015- 2016- 2017- 2018- 2019- 2020- 2021- 2022- 2023- 2024- 2025- 2026- 2027- 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 TOTAL REVENUES $383,393 $663,696 $712,582 $789,454 $742,658 $848,567 $775,818 $783,329 $693,584 $588,533 $857,664 $1,424,420$1,125,530$1,160,141$1,195,857$1,232,716$1,270,754 TOTAL EXPENDITURES $520,438 $584,704 $786,039 $799,405 $779,990 $788,543 $829,128 $810,494 $750,737 $991,360 $853,655 $1,014,330$1,208,983$1,073,001$1,103,736$1,137,634$1,170,742 NET REV > EXP $(137,045) $78,993 $(73,456) $(9,951) $(37,332) $60,024 $(53,310) $(27,165) $(57,153) $(402,828) $4,010 $410,090 $(83,453) $87,140 $92,121 $95,082 $100,012 FUND BALANCE $612,402 $691,395 $617,938 $607,987 $570,655 $630,678 $577,369 $550,203 $493,050 $90,222 $94,232 $504,322 $420,869 $508,009 $600,130 $695,212 $795,224 HISTORICAL HIGH EXP, EXCLUDING CAPITAL $853,655 $853,655 $853,655 $853,655 $853,655 $853,655 $853,655 $853,655 $853,655 $853,655 $853,655 $853,655 $853,655 $853,655 $853,655 $853,655 $853,655 SPENDING ABOVE PRE-MILLAGE HIGH $160,676 $355,329 $219,347 $250,082 $283,980 $317,088 Page 66 of 68 63 Senior Services Fund Immediate Impact Items And Next Steps in Aging in Place Plan Implementation Page 67 of 68 64  MODIFICATIONS TO THE POSTED DRAFT VERSION OF THE MASTER ADMINISTRATIVE FEE SCHEDULE Page 8 – Line inadvertently omitted; Page 9 – Amount entered incorrectly; no change from prior year. no change from prior year. The fee should appear as: The fee should appear as: Page 68 of 68 65