City Commission Budget Workshop (2024-07-23)

7/23/2024 MEETING MINUTES SESSION OF THE COMMISSION BUDGET WORKSHOP CITY OF KISSIMMEE CITY HALL, COMMISSION CHAMBERS 101 CHURCH STREET, KISSIMMEE, FLORIDA 34741-5054 TUESDAY, JULY 23, 2024 AT 2:00 PM 1. MEETING CALLED TO ORDER Members Present: Mayor Olga Gonzalez, Commissioners Olga Castano, Angela Eady, Janette Martinez Staff Present: City Manager Mike Steigerwald, Deputy City Manager Desiree Matthews, Assistant City Manager Austin Blake, Deputy City Clerk Tameara Crespo, Finance Director Tavia Ritchie, Human Resources Director Roxane Walton Members Absent: Commissioner Carlos Alvarez III Staff Absent: City Attorney Olga Sanchez de Fuentes, City Clerk Linda Hansell Mayor Gonzalez called the meeting to order at 2:00 PM. 2. INTRODUCTION AND HIGHLIGHTS City Manager Steigerwald provided an introduction, highlighting the key points of the proposed budget to include: current statistics and trends, a sixteen-year consecutive millage rate, economic outlooks, population, growth, and the City9s financial stability. He detailed the City is proposing a 5% increase for all non-union employees, keeping us in the top half of salaries in the region. He reviewed the recent accomplishments of the City which included multiple public safety, transportation, infrastructure, economic development and housing initiatives. City Manager Steigerwald encouraged the Commissioners to review the <Budget in Brief= booklet provided by the finance department (Exhibit <A=). After reviewing accomplishments, City Manager Steigerwald was please to announce the Proposed Budget for FY 2025. He outlined the proposed budget and five-year capital plan which included: no increase in the millage rate, diversity of the City9s revenue sources, indicating that the reserves remain strong at 33%. He reviewed future public safety enhancements and security initiatives such as new cameras in the parks and trails, a KPD headquarter expansion, a new emergency communications center, public safety training center expansion and three new fire stations. He outlined various parks and transportation projects including those underway due to securing millions in grant funding. He ended his presentation by reviewing the new personnel and positions projected over the next five years for each department, and the compensation enhancements that have allowed for the 5% salary increase with additional market adjustments for certain positions, in addition to new training programs and no increases to employee insurance premiums. 3. BUDGET OVERVIEW 3.A Proposed Annual Budget Fiscal Year 2024-2025 Finance Director Tavia Ritche provided a holistic view of the Proposed FY 2025 Budget via a PowerPoint Presentation (Exhibit <B=). Her presentation touched on key areas to include millage, ad valorem, overall budget health, revenue, general fund allocations, fund highlights (local option sales tax, gas tax, mobility fees, liability, building funds, enterprise funds, health insurance funds, and CRA9s), debt overview, reserve overview, market updates and financial trends. She reviewed the economic assumptions including inflation, tourism, sales tax, investment income, external factors and benefit costs.

7/23/2024 Director Ritchie brought to the Commission9s attention that the City received AA+ bond rating. In closing, she stated the importance of a strong and healthy reserves in case of emergencies; the city is prepared. Commissioner Eady commended staff on not raising the insurance premiums and Director Ritchie explained that due to the City9s diversity in funding sources, we were able to offset the raising costs of premiums with various other revenues generated. City Manager Steigerwald pointed out that while other cities charge employee9s for health care coverage, Kissimmee does not. Mayor Gonzalez commended Director Ritchie and her staff on transparency in financial reporting and fiscal responsibility despite many external factors and hardships such as COVID and multiple hurricanes. 4. REVIEW OF DEPARTMENTS City Manager Steigerwald provided a brief summary of each department as outlined on the agenda. The Commission engaged in one-on-one discussion with each department director. The directors were asked questions by the commission regarding varies issues to include: departmental needs, operations, staffing and personnel, current services, and retention and hiring initiatives. Each director responded to the Commission with their updates and reiterated that they are well prepared for the growth as outlined in the budget requests for the next five years. City Manager Steigerwald and the Commissioners briefly discussed consolidation of positions, cross training in multiple areas, and the positive effects of the minimum wage increase on recruitment and retention of staff in multiple departments. 5. GENERAL DISCUSSION Human Resources Director Roxane Walton presented a PowerPoint Presentation (Exhibit <C=) that reviewed the potential options as it relates to commissioners earning a pension. She compared the differences between a City Pension and City Contributions. The presentation reviewed tier options, retirement eligibility, partial vesting schedule, benefit calculations, contribution limits and notable differences between a City pension, 457 (b), and 401 (a) plans. If the board approves the pension option, this can be done via ordinance and would not require a charter change. Commission consensus was to review the information thoroughly and the item will be placed on the August 20, 2024 agenda for future discussion. City Manager Steigerwald briefly reviewed the current language in the City Charter (Exhibit <D=) and discussed the compensation and formula used to determine commissioner9s salaries. He is waiting for the City Attorney to provide an official legal opinion regarding one- time bonus payments for commissioners and whether that will require a charter change. This item will also be brought back on the August 20, 2024 agenda for future discussion. Director Walton returned to the podium to present a PowerPoint and updates on employee childcare services (Exhibit <E=). An anonymous staff survey was conducted in April 2024. She reviewed the key findings, staff recommendations, and introduced a dependent flexible spending account (FSA) as a way to offset childcare costs for staff, which included $5,000 per year. If Commission consensus is received, the pre-tax benefit would begin in January 2025. Deputy City Manager Desiree Matthews sought commission direction on how to move forward with this upcoming fiscal year9s social services funding allocation process. She reviewed a few options including: continuing the previously established process of invitation only plus past applicants to participate, or advertise to all non-profits that have not previously applied and give uninvited organizations the opportunity to apply. She additionally discussed placing limitations or restrictions on the number of years an organization can apply or a percentage

7/23/2024 theory that gradually reduces the funding over a period of time. Commission consensus is to bring this item back on the August 20, 2024 agenda and Deputy Manager Matthews will compile data and statistics for the Commission on the outcomes of what similar organizations have done. 6. CONCLUSION City Manager Steigerwald briefly discussed a citizen9s suggestions and the Finance Director has responded to these suggestions via email (Exhibit <F=). City Manager Steigerwald explained that State Law requires us to adopt the proposed millage. Commissioner Eady made a motion to adopt the proposed millage rate at 4.6253. Commissioner Martinez seconded the motion. Motion carried 4 - 0. Commissioner Eady made a motion to adopt the Public Hearing Schedule (September 3 and September 17, 2024). Commissioner Castano seconded the motion. Motion carried 4 - 0. There being no further business to come before the Commission, Mayor Gonzalez adjourned the meeting at 5:15 PM. MAYOR-COMMISSIONER ATTEST: CITY CLERK

7/23/2024 Exhibit <A= Introduction and Highlights <Budget in Brief= Booklet

7/23/2024 Exhibit <B= Budget Overview PowerPoint Presentation FY Budget 2024/2025

7/23/2024 Exhibit <C= General Discussion PowerPoint Presentation: Commissioner9s Pension v. City Contributions

CITY OF KISSIMMEE B u d g e t w o r k s h o p J u l y 2 3 , 2 0 2 4

Proposed Pension for Elected Officers

Proposed Pension Contribution Structure for Elected Officials " City contribution " Last year the City Contributed a minimum of 21.5% of the commissioner's salary. " Commissioners " 3.69% of Salary for Tier 1 " 7.5% of Salary for Tier 2 " Retirement Eligibility " Commissioners must be at least partially vested (5 years). " Must be at least 60 years old to collect the pension. " Must have accrued a minimum of 10 years of credited service.

Partial Vesting Schedule Vesting starts after 5 years of service, with increasing percentages based on years of service: " 5 years but less than 6 years: 25% " 6 years but less than 7 years: 40% " 7 years but less than 8 years: 55% " 8 years but less than 9 years: 70% " 9 years but less than 10 years: 85% " 10 or more years: 100%

Example Contributions: Tier 1 Fiscal Year Pensionable Pay Tier 1 - 3.69% Commissioner Contributions 21.5% City Contribution 2021 31,500.00 1,162.35 6,772.50 2022 32,000.00 1,180.80 6,880.00 2023 32,500.00 1,199.25 6,987.50 2024 33,000.00 1,217.70 7,095.00 2025 33,500.00 1,236.15 7,202.50 2026 34,000.00 1,254.60 7,310.00 2027 34,500.00 1,273.05 7,417.50 2028 35,000.00 1,291.50 7,525.00 Total Contributions 9,815.40 57,190.00

Example Contributions: Tier 2 Fiscal Year Pensionable Pay Tier 2 - 7.5% Commissioner Contributions 21.5% City Contribution 2021 31,500.00 2,362.50 6,772.50 2022 32,000.00 2,400.00 6,880.00 2023 32,500.00 2,437.50 6,987.50 2024 33,000.00 2,475.00 7,095.00 2025 33,500.00 2,512.50 7,202.50 2026 34,000.00 2,550.00 7,310.00 2027 34,500.00 2,587.50 7,417.50 2028 35,000.00 2,625.00 7,525.00 Total Contributions 19,950.00 57,190.00

Example Benefit Calculation Commissioner vested for 8 years: " Retirement age of 60 " Estimated benefit: "Tier 1 (2.8%): $514.27 "Tier 2 (3.0%): $546.00 " The retirement benefit estimator provides insights into the proposed retirement benefits for elected officials under a new ordinance. (HR Intranet)

2024 Retirement Plan Contribution Limits for 457(b) & 401(a) The following chart compares the contribution limits for 457(b) plans and 401(a) plans. Each plan has separate contribution limits. 457(b) Plans 401(a) Plans " Maximum Annual Contribution $23,000 $69,000* " "Age 50 Catch-Up" Limit $7,500 None *Maximum not to exceed the total annual salary.*

Notable Differences 457(b) Deferred Compensation Optional Employee Contributions " No 10% Tax Penalty for Early Withdraw before age 59½. 401(a) Defined Contribution Employer Sponsored " 10% early-withdrawal penalty before age 59½. " City contributions are discretionary. " City contributions are pre-tax dollars. " City sets vesting schedule for the city contributions.

Next Steps " Direction and Funding " Prepare Ordinance Change for Pension; or " Set up 401(a) plan for elected officials " Complete Onboarding Paperwork

7/23/2024 Exhibit <D= General Discussion Current Charter Language: Commissioner9s Salaries

7/23/2024 Exhibit <E= General Discussion PowerPoint Presentation: Employee Childcare

Employee Childcare Survey

Employee Childcare Survey April 2024 " Aim: To understand childcare needs and preferences. " Survey overview: 680 responses (87%) from approximately 780 city employees.

Survey Key Findings Interest in City-Provided Information on Childcare Programs available in the community: " 33% or 220 out of 669 respondents expressed interest. How much are you able to pay per week for Childcare: " 4% receive help from the Early Learning Coalition or other service. " 75% pay $1 - $300 per week for childcare services. " 18% pay $301 - $600 per week for childcare services. Top 6 Important Factors for Parents: " Cost " Reliability " Security & Safety " Work Schedules " Quality " Location

Key Findings Children’s Age Ranges Based on Responses Results Infant (0-2 years old) 72 Toddler (3-5 years old) 83 Elementary school (6-11 years old) 138 Middle School (12-14 years old) 91 Not Applicable 406

HR Recommendations

Recommendations Additional resources available to our employees " Cigna Employee Assistance Program Has Referral Services for child and elder care https://my.cigna.com/web/secure/consumer/coverage/eap " Child Care Resource and Referral Service https://www.elcosceola.org/child-care-resources-referrals

Implement Dependent Flexible Spending Accounts (FSA) Fee Structure: " $3.95 per participant per month with a guaranteed amount per month. Tax Savings: " Significant tax savings 10-30% on expenses for the care of qualified dependents. Pre-tax Dollars: " Money set aside in the account is in pre-tax dollars, reducing taxable income.

Example Savings " For a 15% federal tax bracket, save $150 in federal taxes for every $1,000 spent on dependent care. " Approximately 21.35% savings on every dollar contributed to an FSA. Combined savings include employee share of FICA taxes (7.65%) and average income tax rate (13.6% to 21.25%).

Next Steps " HR has evaluated multiple companies providing FSA services. " Direction for potential implementation.

Thanks! @ C it y o f K is s im mee

7/23/2024 Exhibit <F= Conclusion Citizen Email

From: Mike Steigerwald To: Tameara Crespo Subject: Fwd: Public Comment on Budget Proposal Date: Tuesday, July 23, 2024 7:40:19 AM Please include the finance directors response as well. Sent from my iPad Begin forwarded message: From: Tavia Ritchie <Tavia.Ritchie@kissimmee.gov> Date: July 23, 2024 at 6:50:11/AM EDT To: Mike Steigerwald <MIKE.STEIGERWALD@kissimmee.gov> Subject: RE: Public Comment on Budget Proposal ÿ The Government Finance Officers Association (GFOA) has approximately 200 Best Practice (BP) and advisory statements and these are continuously evolving as technology changes and new accounting guidance is issued. We9ve taken particular interest in making sure the City of Kissimmee aligns itself with the BPs where feasible. Of the nearly 200 BPs, only 28 of those best practices are geared specifically towards the budget. The Structurally Balanced Budget BP is a budget best practice; however, the Capital Asset Management BP is not a budget best practice. Furthermore, the GFOA Distinguished Budget Award stretches its 28 best practices into 83 criteria for the award. Our budget meets all of the criteria. However, there is always room for improvement. In addition, the structurally balanced budget best practice is not advocating that recurring revenues be formally allocated or "earmarked" to recurring expenditures, but rather is advocating that the budget presentation provide transparency as to whether recurring revenues and recurring expenditures are balanced. Our budget presentation gives an overview of reserves and their relationship to the budget. This is also outlined in the budget message on starting on page 7 and in the Reserves Balance schedules section starting on page 27. Our budget process encompasses a five year outlook to take into account long term financial sustainability to ensure we properly account for future expenses. Our forecasting includes all expenditure categories: personnel, operating, capital, reserves and debt. The capital asset management policy is geared towards inventory. It is not the same as our capital improvement plan. Both provide useful information; however, the best practice is referring to inventory not a full capital asset inventory listing displayed within our capital improvement plan. For example, our City engineers keep a detailed inventory listing of our roads and this is how our paving gets prioritized and funded annually. This is accomplished separately, not alongside the CIP.

We must be careful not to inundate our readers with too much information. Currently, the budget book is over 300 pages long. We try to capture all of GFOA9s recommendations in a manner that is plain yet captivating to keep the interest of our readers, citizens, and external stakeholders. With so many areas, to touch on it9s easy that some can be missed or unclear altogether upon the first, second, and even third reading. From: Mike Steigerwald <MIKE.STEIGERWALD@kissimmee.gov> Sent: Monday, July 22, 2024 3:06 PM To: Tavia Ritchie <Tavia.Ritchie@kissimmee.gov> Subject: Fwd: Public Comment on Budget Proposal Thoughts? Begin forwarded message: From: Alex Alemi <alexalemi@gmail.com> Date: July 22, 2024 at 2:51:58/PM EDT To: Linda Hansell <linda.hansell@kissimmee.gov>, Mike Steigerwald <mike.steigerwald@kissimmee.gov> Subject: Public Comment on Budget Proposal ÿ EXTERNAL EMAIL: This email originated from outside of the organization. DO NOT REPLY, CLICK LINKS, or OPEN ATTACHMENTS unless you recognize the sender and know the content is safe Hi, I wanted to share some comments on the Kissimmee city budget since I am unable to attend tomorrow9s budget workshop. I am very happy to see the city emphasize financial sustainability in this year's budget. The city's commitment to financial excellence was recently recognized by the Government Finance Officers Associations (GFOA) when Kissimme was awarded the Triple Crown. The city should be proud of this accomplishment. Kissimmee was one of only three municipalities to receive this award for its transparent and distinguished financial documents this year. I would love to see Kissimmee continue to strive for excellence by embracing GFOA best practices I did not see reflected in this year's budget. In particular, the "Achieving A Structurally Balanced Budget" and "Capital Asset Management" best practices. As the GFOA points out, currently accepted balanced budget practices may not be enough to ensure financial sustainability. These best practices help to fill in some of

the gaps. One shortcoming in current budget practices is that resources and expenditures are not broken down into recurring and non-recurring sources. This makes it difficult to properly account for predictable future expenses associated with recurring maintenance liabilities. The practices outlined in the above proposals encourage cities to break down resources and expenditures into recurring and non-recurring sources in their annual budgets. And, furthermore, to include in their capital improvement plan a full inventory of the city's assets, including renewal and replacement life cycles and replacement costs. A "structurally balanced budget" is one in which recurring costs are balanced by recurring revenues. I would love Kissimmee9s FY25 proposed budget to report on structural balancing and for the five year capital improvement plan to include a full capital asset report. The GFOA also recommends that the city provides a plain language report summarizing its capital assets, including maintenance liabilities, to elected officials and the public at least once every three years. This can help increase transparency and guide future decisions on taking on long term liabilities. To illustrate how these practices could be of use to the city, let us consider the maintenance liability inherent in the city's paved roads. In its performers indications, the FY25 lists that the city currently maintains 166 miles of paved roads. It does not report on the service lifetime and replacement cost for those roads. I used FDOT9s Cost Per Mile and Service Life reports to estimate these costs. FDOT indicates that it costs about $850k/mile to mill and resurface a (two lane urban) road and that this has to be done every 12 to 20 years. Taken together, these numbers indicate that the average cost to maintain Kissimmee9s current road network is at least $7 million per year. Meanwhile, the FY25 budget (pg. 260) seems to have allocated only $900k from the local option gas tax for materials and supplies to maintain these roads. I believe this disparity should be looked into. I would love to see a more detailed analysis from the city on long term maintenance liabilities, not only for roads, but for all of the city's assets, such as stormwater pipes, ditches, sidewalks, parks and public lands, vehicles, etc. As the GFOA best practices highlight, the current reporting methods make this type of analysis extremely difficult and therefore can obscure predictable future shortfalls due to recurring maintenance costs. I am proud of Kissimme9s commitment to financial sustainability and transparency in financial reporting. I believe that adopting the Structural Balanced Budget and Capital Assets management best practices will help the city fulfill these goals and help ensure the city9s long term financial solvency.

Best Regards, Alex Alemi [AlexAlemi@gmail.com]