Commission Budget Workshop #1 (2025-06-24)

1 MINUTES COMMISSION BUDGET WORKSHOP #1 Tuesday, June 24, 2025 6:00 PM – COMMISSION CHAMBERS CALL TO ORDER Mayor Scott Newton called the workshop to order at 6:04 p.m. Pledge of Allegiance The Pledge of Allegiance was recited. ROLL CALL City Clerk Elizabeth Garcia-Beckford called the roll. Present were Mayor Scott Newton, Vice Mayor Chris Caputo, Commissioner Mike Bracchi, Commissioner Don D’Arminio, and Commissioner Paul Rolli. A quorum was present. Also in attendance were City Manager Leigh Ann Henderson and City Attorney Kerry Ezrol. COMMENTS FROM THE PUBLIC At this time Mayor Newton opened public comment. Daniel Rahm, 611 Kensington Place, Chair of the City’s Financial Advisory Board, noted that tonight’s financial presentation will include a 6% expenses option for salary and wages over the next three to five years. This option will provide parameters for prospective cost increases. He also highlighted the City’s unassigned Fund Balance, which is currently at 38% of the General Fund budget. With no other individuals wishing to speak at this time, Mayor Newton closed public comment. PRESENTATION AND DISCUSSION Budget Update Finance Director Carol Conol introduced Peter Napoli of Stantec Consulting, which recently

2 conducted the City’s General Fund Financial Sustainability Analysis. Mr. Napoli explained that Stantec provided a long-term General Fund financial sustainability forecast, which involved establishing a financial model to replicate the City’s financial dynamics. This model does not address the City’s Enterprise Funds or other special revenues. Mr. Napoli reviewed the 2025 adopted budget and revenues, which included the following: • $23.9 million • Exclusion of the General Obligation (GO) Bond The projected 2026 total revenue is $25.13 million, which represents a 5.2% increase over the current year. The five-year forecasting model incorporates a number of escalation factors, including the actual 7% increase in property taxes in 2026, followed by a 5% projected increase in 2027 and 4% increases thereafter. These projections represent a conservative perspective and the variables are subject to change. The following increases are also projected for primary revenue categories in fiscal year (FY) 2026: • Utility service taxes: 3% • Permits, fees, special assessments: 1.6% • Intergovernmental fees: 1.9% • Service charges: 3.5% • Total: 5.2% Expense inputs and assumptions were calculated from an operating perspective, including personnel, operations and maintenance, repairs, and capital outlay. The 2025 adopted operating expenses are $21.7 million. The projected 2026 operating expenses are $23.1 million, which is a 6.3% blended increase. Estimated escalation factors for the 2026-2029 projections include: • Salaries and wages: 6% • Personnel benefits: 8% • Operating expenditures: 3% The 2025 General Fund Balance shows expenses of $22.9 million. The projections calculate that the City should maintain 17.5% of this amount, or roughly $4 million, for liquidity, emergency capital, and other circumstances. The beginning 2025 Fund Balance was approximately $8.9 million, which is closer to 39% of total expenses. The final component of cash flow calculations is the Capital Improvement Program, which averages $1.9 million over a five-year period. Major projects include roof replacement, barricades, street improvements, and an annual contribution to the City’s Vehicle Replacement Program to maintain the fleet. Stantec’s financial model includes the following components: • Five-year projection period from 2026 to 2030 • Millage rate maintained at current adopted rate of 6.4196 mills

3 • Taxable value increase, which is estimated at 7.3% in 2026 by the Broward County Property Appraiser’s Office; this projection falls to 5% in 2027 and 4% thereafter within the projection period • Annual cash flow for each year, which projects a minor deficit of $760,000 in 2026 and continued deficits thereafter; the City would be expected to use its Fund Balance to cover these gaps • End-of-year and minimum targeted fund balances projected for each year The Commissioners discussed the presentation, with Commissioner D’Arminio stating that he did not see a need for a millage rate increase over the next few years. Mr. Napoli confirmed that the forecast suggests the current millage rate is sustainable over a five-year period, as it maintains the Fund Balance above minimum requirements and allows for the funding of identified capital projects and operating expense increases. Commissioner D’Arminio also observed that the projection assumes no economic development, with the estimated increases in property values coming from properties already built. He asked if, should a 0% increase in market value occur, the City would still see an increase in taxable values due to its homesteaded properties. Mr. Napoli replied that many values may still increase under the 3% Save Our Homes cap. He concluded that the blended rate increase represents a number of possibilities. Vice Mayor Caputo requested clarification of the basis for the 1.4% increase in penalties, fees, and assessments, asking if this was based on the budgeted or actual amounts. Mr. Napoli replied that this was based on the trend of the last three years’ actual growth. He further clarified that the majority of intergovernmental fees comes from the sales tax distributed by Broward County to its municipalities, as well as licenses and grants. Commissioner Rolli asked if the model can identify any expenses that could be significantly reduced in order to lower the millage rate. Mr. Napoli explained that this would require a discussion of levels of service with staff; while the model can show what a reduction would do, it cannot advise the City on where or how cuts should be made. Commissioner Bracchi expressed concern that in FY 2025, the Commission was advised that they would need to increase the millage rate in order to bring in sufficient revenue to cover expenses; however, the unassigned Fund Balance is now significantly larger than the 15% to 20% required. He requested clarification of the intent of the Fund Balance. Mr. Napoli stated that these dollars are best applied to one-time uses, such as capital projects or emergencies. Commissioner Bracchi recommended a reduction in the millage rate in 2026, followed by a balanced budget every year going forward and up to only 20% in the Fund Balance. Vice Mayor Caputo added that he would also like to hear from City staff regarding how the Fund Balance increased to its current amount. Commissioner D’Arminio suggested that one component of the increase may be Code Compliance, as the City budgets conservatively for that revenue. He noted that the Commission may wish to review projected Code Compliance revenue for 2026. Commissioner Bracchi pointed out, however, that the City is preparing to undertake a Code Compliance amnesty program for the next few years, which could lower this revenue.

4 Commissioner D’Arminio requested clarification of why the Capital Improvement Program (CIP) is estimated at more than $1 million more in FY 2026 than in subsequent years. Mr. Napoli replied that the 2026 CIP includes a number of roof replacements which are not expected to recur in later years. Mayor Newton explained that tonight’s workshop is Budget Workshop #1, which provides an overview of what may happen in the next five years. He agreed with previous recommendations to give a financial respite to residents through a small reduction in the millage rate if possible; however, he also acknowledged that there are several City projects that have been postponed more than once, and these expenses could increase if they are not addressed in a timely manner. He also agreed that the current Fund Balance percentage is exorbitant, and felt some of those dollars could be applied to one-time projects, although he cautioned against taking too much out of the Fund Balance over time. Commissioner D’Arminio asked if the 2026 CIP may be “front-loading” projects in order to prevent adding to the Fund Balance. City Manager Leigh Ann Henderson confirmed this, noting that if a particular project is not undertaken in 2026, the amount of that project can be held in reserve so the funding remains committed to that project. She emphasized that no CIP funds would be spent on projects that are not needed. City Manager Henderson explained that the target of the unassigned Fund Balance is 15% to 20% of the City’s Operating Fund. The revenues that have contributed to the Fund Balance’s current level came from one-time unanticipated sources, including Code Compliance liens. Other contributors include unanticipated interest earnings on American Rescue Plan Act (ARPA) money as well as increased interest rate revenue. Staff will provide a listing of these factors for the Commission. Vice Mayor Caputo addressed the proposed Code Compliance amnesty program, pointing out that it would apply to residential properties only, while most substantial fines were accrued by commercial properties. He felt there was room for some growth in Code Compliance revenues in the future. City Manager Henderson again emphasized that these funds are best used for one- time capital needs, as they are not guaranteed recurring revenue sources. Commissioner Bracchi requested additional clarification of how funds for capital projects are reserved for those projects if not used in the expected year. City Manager Henderson explained that funds can be designated for specific projects within the CIP and will remain in those designations until they are either used or released for other purposes. She added that the Commission may choose to discuss this type of designation further as part of their annual audit process. It was noted that Budget Workshop #2 is scheduled for July 2025, with the date not yet set. It will include more direct discussion of the City’s needs, maintenance, staffing, and other considerations. The budget book is expected to be published and available online by July 10, 2025.