Oct 22, 2025 4:00 PM - Redding City Council - Special Meeting

>> All right, so now let's get this party started. All right. If anyone wishes to address the city council on any item considered at this meeting before or during the council's consideration of that item. Please enter your name in the electronic kiosk located in the lobby. The city council allocate up to a maximum of 3 minutes per speaker or each agenda item, which we only have one. Staff reports are available online at the city's website, cityovered.gov and in the public view binder located on the podium at the north side of the chambers. All right, let's do the pledge. >> One, two, three, begin. >> I pledge allegiance to the Flag of the United States of America and to the Republic for which it stands, one nation under God, indivisible, with liberty and justice for all. >> All right. >> No, not today. All right, roll call. [ CALLING ROLL ] >> All right, we'll start with public comment. Just a few names, Denise, Maxwell, you're up. >> We're not gonna have a presentation. We have a presentation first because this isn't. Because we don't have. We don't have a three. >> Yeah, we don't have a three. Like public comment. Like regular. >> So you would only be taking public comment on the item that's on the agenda. It's council's discretion as to when in the meeting you want to. >> Yeah, let's do the presentation so they know what they're commenting on. >> Okay. All right, I can go with that. All right, Mr. Robinette. Sounds good to me, so. Yeah, I do. >> Oh, yeah, me too. Had a migraine all day. >> Good evening, Mayor, council, members of the community. We had a report of findings that was issued in August of 2025, and I was asked by the council to issue a response to that report. And I wanted to start by saying, as an accountant, I've always taken my responsibility seriously of questioning myself, questioning my work. The example I would always use is, as I'm reconciling something, it's important to continue to question yourself because sometimes you might find the right number. But there's more underlying issues that need to be addressed as part of that reconciliation. And so I take that very seriously, and I always have. And I took that same level of seriousness to my response to this report. So to begin is just a brief outline of the presentation, beginning with the financial reports and the informational overview, discussion of the current budget, discussion of some historical budget information, discussion of American Rescue Plan act funds and how they were used, and then finally finishing with some salaries and personnel positions at the very end. So first is an overview of our timeline of the budget and financial reporting. Our budget always begins in an odd year, spring of an odd year. And we work on getting all of the information necessary, whether it be personnel costing, all the assumptions we're going to use to build into that budget. At the same time, our departments are working towards explaining we actually moved to a zero based budget process where they actually have to explain every single item in their budget. And the departments are working on spreadsheets to justify every line item in the new system. They were putting that justification in the actual system. And at the same time finance begins to work to reconcile all the personnel positions as well. And, and so every single line item is justified in the budget and then in the necessary funds, the 10 year plans are produced or long term financial plans to ensure the long term stability of the different funds. And most of this presentation will focus on the general fund financial plan. After the biennial budget, we move into doing quarterly updates. These include revenues and expenses. Budget to actuals, we update the ten year plan and that happens. Budget to actuals happen four times a year for a total of eight over the course of the two year budget cycle. And the ten year plan is typically updated two times a year or four times over the course of the budget cycle. Finally, we move into our annual audit process and the preparation of our annual comprehensive financial report or ACFR. This is basically our final audited financial information. It uses different bases of accounting depending on what page you're on in the book. And it's a very complex process and I always thank the finance team for their hard work on that process because it begins with our day to day work and it ends with kind of that year end culmination of all the efforts. And ultimately we turn all that information over to our external auditors every year and we go through an annual audit process. In the next couple slides I'll get into exactly some of the specifics of what they're hoping to accomplish. So this slide actually goes over the most recent biennial budget development process, the series of budget workshops that we went through. So on January 23, 2025 we had a general fund and internal service fund overview. It mostly focused on the previous budget as a reference point to our current budget development. But in that process there was some direction received from council directed staff to review the cannabis tax rates directed staff to review fee charging methodology across what we commonly refer to as our master fee schedule or schedule of fees. Also at that Meeting, there was an acknowledgement of cutting one position who had left city employment with the communications team, communications coordinator. And then a delay of the radio loan payments. And then Moving forward on March 4, it's not on the slide here, but on March 4, council approved rates to the cannabis tax, changes to the rates. And then on March 13, there was a second budget workshop held where council directed staff to reduce rolling stock contributions in the general fund. Three additional police officers were removed from the budget. The tourism contract was reduced by $350,000. And then there was specific direction received on how we would approach the fees as we developed them as part of the master fee schedule, some of the most substantive of which included the development, service and recreation fees. Ultimately, moving forward into May 6, there was a general fund over full general fund overview and internal service fund presentation of the budget. There was some discussion particularly around the sales tax assumptions and lowering the assumptions in the first couple years. And so on May 21, 2025, there was some updates to the general fund and a 10 year plan presented. And then the enterprise fund budget workshop. And then on June 17, 2025, the budget was adopted. So next is, I just want to be clear when we're talking about a balanced budget, what do we mean? We mean that revenues or project revenues are equal to or greater than projected expenditures. And some of the challenges in this process is revenues can be unpredictable. We've seen that, particularly over the past, probably three or four years with sales tax. And then of course, there's always potential unknown expenditure pressures that could be lurking around the corner, especially when you're adopting a biennial budget that could happen due to inflation, union agreements or additional service demands. So the status of a balanced budget could change as the conditions move into the future. In this example, we adopted a budget back in June. Most of the work for that budget was done in March and April timeframe. And so we're already six months into that budget, effectively or six months past when that work was done. So importantly, the roles of the different elements here, finance is responsible for gathering and presenting information to the city manager. And ultimately, once the actual information comes in, we account for that information and report financial information back to council. The city manager presents and makes recommendations to council and ultimately is responsible for budget management. Ultimately, council is responsible for deliberating, making any modifications and requesting additional information as necessary. And then if they feel like they have all the information they need, approve the budget. So next up, I wanted to give a brief overview about our 10 year plan. I know it was mentioned earlier in the presentation but the City of Redding this is our long term financial planning tool. It's adopted and reconciled to the adopted budget for the first two years of the biennial. After that we amend it typically four times through council action at the mid year, the mid cycle, the second mid year and then the year end in September. Ultimately this is amended for council actions including all budget resolutions between the amendment cycles. Sorry, I skipped over a slide. So the Council policy that dictates that we have a 10 year plan is council policy 412 and it also mentions the 10% of expenditure required reserve. This was changed from 5% to 10% in 2020 and provides a greater level of reserve for the health of the general fund. The Council Policy 219 requires that 73% of expenditures cap on personnel expenditures. I thought this quote was powerful. From Council Policy 412 which I believe to be a great council policy is the budget decisions today will have an impact on the City's future and not only what is accomplished, but what resources are available in the future. It is important to know what the ten year plan is not. The ten year plan is not amended for the actual results of revenue and expenses and it is not amended for total amended including carryovers and other items allowed by Council policy such as rolling stock, the equipment replacement fund and carryovers. As I mentioned next, the quarterly financial updates. This is when staff presents budget to actuals for revenue and expenses. Budget to Actuals based on the cash flow. The best example I use here is the actual property tax. Because this is an item that is heavily influenced by cash flow. We don't receive most of the property tax, well half the property tax until January. So built into our cash flow assumptions is receiving that property tax in January. And so we actually report relative to those expectations that staff set during the budget process. Included in this process is a presentation to council where we do our best to emphasize the important key takeaways of each of the updates to council. And then ultimately, as I mentioned at the at the midyear, midcycle and year end, four times through the budget process, we update the 10 year plan. So to discuss a little bit about our annual comprehensive financial report, this is a slide that kind of goes over the main substantive sections of the financial report. I always tell people if you want to learn a lot of interesting information about our city, I would flip to the statistical section and it is important to note that that is an unaudited section and then there's an introductory section that is helpful for the reader to understand some key information about the city, our auditors, and the organization as a whole. And then the kind of meat and potatoes, as I like to call it, is the financial section. This includes the independent auditor's report. It includes the management discussion analysis, which is unaudited. It includes all of the financial statements, the notes to the financial statements, and any required supplementary information or supplementary information. Finally, our annual audit. This is an independent review of our financial statements they perform. There's basically five required engagements, but in that there's a large list of things they're trying to ensure that we're following. But the five engagements are the City ACTFR, RABA, ACTFR, the Housing Basic Financial Statement, our passenger facility charges. If you don't know what that is, that is as a result of us having airline passenger. Airlines at the Redding Airport. We receive passenger facility charges and we are required to undergo an annual audit with an opinion from the auditors on that item. And then the single audit. Some people might refer to this as your CEFA or your schedule of federal awards. Any agency that receives over $750,000 in federal grant money must undergo a single audit. And we undergo one every single year. And ultimately through that process, the auditors are evaluating the financial records, they're evaluating our internal controls, and, and they're ensuring that we have compliance to different major programs and compliance with different laws, regulations, and then ultimately offering an opinion on the fairness of the financial reporting. And oftentimes through that process, there's some opportunities they offer for improvements and efficiencies and accountability. This is completed in accordance with GAAP, GAAS and the Uniform Guidance. So the financial reporting results. I am proud to say that I work in a department that has a long history of taking our financial information extremely seriously and dedicating a lot of time to this community. And so we, as a result of that hard work, we haven't had any audit findings. The last one I could find was 2012. We've received the GFOA Certificate in Excellence in financial reporting for 40 consecutive years. I expect the most recent year of FY 2024 to hear on that. Soon it would be 41 years and then we've received the GFOA Distinguished Budget presentation award since 2019. So moving to a project that is important to our financial reporting because of the impact that it's had is our Oracle Project. Ultimately, we Council directed staff in late 2021 to release an RFP. That RFP was released in early 2022 and a system selection was made in around May of 2022. And then from there, we negotiated a contract and agreed to a contract with the system and what they call a system implementer or system integrator. And ultimately, this is the timeline of the project. And so the financial system, we began work in August of 2022, and we went live in July. On July 1, 2023, the HCM system. The project began in earnest in January of 2023. We did. The original scheduled go live date was January of 2024, but ultimately was postponed until October 13th of 2024. And then the EPM or the budget module was approved. Basically, we started the project in January 2024 with a go live that was on time of January 1, 2025. The important part here is that during this process, finance had no staffing augmentations or increases to staffing. Speaking with a lot of different cities and experts in this area, oftentimes a city of our size would likely need two positions to effectively manage this. And through the process, finance was actually down on average. I've done the kind of full chart through the entire process, and we were down two positions on average through the implementation and go live. Ultimately, this had a cascading impact. And not everything was delivered on the exact same timelines as we were accustomed to. But many of these timelines met or exceeded what other cities have experienced doing a similar project. Our first actor was delivered on March 18, 2025. That's about two months late for us. Talking with our auditors through the process last year, they actually said that it can sometimes delay ACT for presentations by up to or over a year. And so we worked very hard to achieve that date. But as I said, there's a cascading impact when you put the resources in to understand your new system and produce your financial statements. There's obviously things that are now, you know, taking longer throughout the process. We did complete our first budget on time, ultimately being adopted on June 17, 2025. Cash reports. We delivered a report kind of as a sample on September 16, 2025, and they will be delivered monthly starting on November 18, 2025. As we finished all these projects, the one thing I didn't touch on in the previous slide is finance was involved in every single aspect of that project. And so our resources were involved in the financial aspect, of course, but we are instrumental in the payroll calculations. And so we were tied up. You know, we had resources, additional time being spent to helping program that system. And so there was a number of hard decisions made of where do we prioritize the work. And through conversations with the city Manager at the time there were some things that were not delivered on the schedule we would expect. And now finally, now that we're done with these project phases, we're getting back to our expectations. And so Treasurer Reports We've had some intermittent reports through FY24 and FY25. Again those will be delivered monthly starting on November 18, 2025. Quarterly reports we first delivered our first mid year out of the new system in February of 2024. At that time we noted to Council that the reports have been modified and that we would continue to evaluate what Council needed, what Council was wanting. We believe the important part is that all of the necessary information to help them make the decisions that were necessary was included in the reports and or emphasized during the presentations that were given by staff. On September 16th of this year we brought a set of reports that were heavily modified to attempt to get back to our old level of reporting. And we are continuing to work with Council on refining that and we will do so on into the future until it meets all Council collective expectations. Then finally the payroll registers upon go live in the new system again, just the cascading of all the work that happens. These registers had some information on them that should not be released to the public, personally identifiable information. And we frankly just did not have the staffing bandwidth to manually manipulate those reports. We're in process with Graviton to get that information off of those reports. But even as of now we're having to go in and manually remove that personally identifiable information for our employees. But those have been caught up and maintained current since August 19th, 2025. Moving into our current budget. I'm going to take a drink. So a summary or an overview of some of the claims that were addressed as part of my response to the report was that the 10 year plan does not meet the 10% reserve. There's revenue misstatements and internal departments and transfers out. The sales tax assumption was incorrectly used and the revenue forecast. There were some concerns raised around some revenue forecasting. Also there was an assertion of expenditure misstatements and that beginning cash is additionally misstated. And then of course there was also finally some concerns over how the budget was balanced. So first the 10 year plan does begin below 10% and through surpluses or a balanced budget in FY26 and FY27 the budget will be the cash will be rebuilt above the 10% as you can see on the slide on the right and I think it's important to point out in the red, that's the measurement of A balanced budget. In our case as a city, we add this additional measurement of a. Of a 10 year plan and 10% reserve across the entire 10 years. But importantly, when people speak of a balanced budget and common vernacular they mean revenues relative to expenses. This is going to be a little nuts and bolts, but I think it's important. It was in my. In the report and the. So first on the upper left is a. Is basically tying out the General Fund 10 Year Plan revenues to the total in the budget document. And there's detail references there on the pages. This is important because as we move to the that includes the subset of internal departments that's over kind of to the right of the slide and there's a list there with the references on what page of the budget document, each of those and then a total subtotal of those items which then is tied to the below amount which ties over here on the bottom left or sorry on the next page we'll tie that number out. And then finally or actually this, pardon me, the graph on the right will be tied out by source as I work through the next couple slides. So on the right gives you kind of internal departments, transfers in, transfers out for the general fund. On the lower left is the transfers in. And so the first transfer in is for gas tax. Basically most of our streets are funded through gas tax. And this is the transfer to basically that will be the work performed in streets. Then we have a Prop 172 transfer. It's $272,000 per year from a special revenue fund within the city. But it is for specific police services. It's been there since 1992 or 1993 I believe. And then airports. A long time ago we used to use property in lieu of tax with airports. Through conversations with the FAA we believed it would be better to actually have this be a reimbursement of the services that are being performed out there. And this isn't the entire cost of the three ARF captains, but there's through each budget there's a conversation with council about how much do we want to transfer from airports to try to balance the needs of the airport, but also the needs of the general fund. And that $250,000 has been in place for two budget cycles now. So that total ties to the total above where it says 10 year plan transfers in and basically puts out the amount stated on the ten year plan. Next up is the tie out of the internal department revenue which is the first line on the upper left graph. The first item is the property in lieu of tax collected from the electric utility. The next line is our cost allocation plan. Revenue that is reflective of city general government does services for the entire city. We have something called a cost allocation plan which reimburses the general fund for those services. And then there's another item on there, the Public works admin and the NPDES. Those are costs incurred within public works for services that are done throughout the city and reimbursed to the general fund. And again that total ties out to the total at the top of the chart on the left. Finally, moving on to transfers out, which is line 3 of the upper left chart. And the details are on the lower right chart. Going through rolling stock, equipment, replacement parking fund, the transfer to convention center which is effectively for the tourism contract and then transfer to library as agreed with the contract with the county. And then the repayments of advances for the soccer turf. So some opportunities and clarifying information here. First, the 10 year plan aggregates revenues differently than the budget document. Internal departments in the 10 year plan includes the pilot cost allocation Plan, Public Works and MPDEs. The budget document includes these items plus transfers in, transfers out and repayments of advances. Transfers in and out in the 10 year plan are separate with other including repayments of advances. There's some opportunities here specifically with the public works and NPDES to improve the reporting in the budget document so that it is more clear and easier for the public to understand. And we'll be making that change in a future budget cycle. And also we should add a schedule that discusses repayments of advances within this within the city discussion around the sales tax forecast. This chart shows the that effectively the information that was available when we were building the budget was the completed FY fiscal year 2024. We would not have had fiscal year 2025 completed at the time of budget development. As I said, most of that work happens in March and April as we lead towards trying to build a budget document that can be presented to council in June. And so subsequently information came in that would indicate that fiscal year 25 was lower than this number. But at the time we developed the budget, we forecasted that it would be flat year over year. It actually ended up down about $500,000 year over year. And but with the calculations we use, we as stated to council at all the budget workshops, we use 0% from fiscal year 24 to 25, 2% increases fiscal year 26 to 27 or fiscal year 25 to 26 and 26 to 27 and then two and a half percent increases thereafter, the average growth over the last 10 years just to support the kind of historical increase of 2% or 2.5% that was used last 10 years has been 3.4% increases. Over the last five years the average increase has been 4.2%. Fiscal year 2025 was not available, as I stated, until the end of June. So revenue forecasting I'm going to say at all this doesn't necessarily. We spend a great deal of time on property tax, sales tax and tot and we all of the taxes. We do a pretty in depth conversation with council and actually during this biennial budget development we even went so far to do some sensitivity analysis on each of those revenues. Kind of a best case, worst case, I hate to say worst case because it probably could always be worse than you expect and there's always a potential it's better than you expected. But doing some sensitivity analysis to give council a range of the potential outcomes on those tax revenues. On all the other revenues, we don't go into as great a detail of presenting every single revenue, but we go through a process of analyzing the historical actuals and trends and we kind of re baseline those projections based on the recent performance of those revenues and then forecast forward with current economic conditions and past trends. This, this budget cycle council requested that we modify some revenues as we went through the budget development process. Specifically cannabis tax rates were increased development fees and recreation fees. The very foundation of how we calculate those was going to be changed. And so we had to implement kind of a separate analysis this year regarding those beyond our normal process expenditures. The charts on page 70 and 71, it's important to point out they include the general grants fund. This is another opportunity. In future budget cycles we'll likely have a separate chart so that this is very clear which funds are or which items are part of the general fund grants. And then so that it's very clear why they're not included in the ten year plan. But in order to reconcile that, I provided a list of all the expenditures that were included in the budget that are for funded by grants. And so there's a list there, $740,000 roughly in year one and just over 1 million in year two. So finally the question of how did the budget gets balanced and ultimately there was about $7 million of expenditure cuts that made up the bulk of it. But ultimately both slides there, as I've mentioned multiple times, we had some major increases or major changes to the way we charge a few fees and the cannabis tax. And then on the right is a list of expenditure modifications. Starting with the tourism and marketing contract that was previously mentioned. We did kind of across the board budget reductions. And even though we asked departments to kind of build their budget from zero, it basically became necessary in this budget development cycle. And I know, having listened to history of our department, that this is a tool that somehow has to get, sometimes has to get used. Think back to the Great Recession where actually the city manager says we're going to cut this amount. And then finance goes and makes those reductions across the board. And that had to happen. During this budget development cycle. Rolling stock was reduced, as I mentioned before. Thirteen police positions were eliminated. Eight of those were sworn, 13 fire positions were eliminated, two assistant city clerk positions, one reprographics technician and one marketing coordinator. So another important part that was raised is the kind of process of the 10 year plan cash. And so during the spring, as mentioned, March, April, we begin to look forward and project the cash. As of July 1st we calculate, then after that the plan calculates the cash for the subsequent years. So that in the case of the current budget, the plan actually calculates the cash through revenue minus expenses. The change of those two will then be plus or minus to the beginning cash that you calculated. And it does the same thing for the second year when in the next slide will kind of show a chart and articulate this. But when we, once we complete the audit, we have what I've termed audited cash. You could call it financial statement cash. And then we adjust that cash for known items to get it back to kind of the budgetary or the ten year plan basis. And so the biggest examples of those are there's some balance sheet items. One of the things you do on your financial statement is you adjust cash to the fair market value. So you adjust for that, for rolling stock balances, get put in the general fund cash on our financial statement, you reduce that out and then you reduce it for carryovers and encumbrances, things that you already have committed to spending. And you arrive at kind of that starting point of cash based off the audited number for that same point in time. Once that's completed, we bring that to council upon the completion of the audit and we make a recommendation to council. Some years there's no change. Some, some years there is a change. But ultimately we follow that process through this cycle. Importantly to note, typically over the past I went back about 12 years, it's always been adjusted in February, with one exception. So this kind of walks through what we did. This budget cycle forecasted in March of 2025 to be approximately 9 million. The old 10 year plan would have forecasted about 8 million with the February update that would have been available at that time. And then as I stated just previously, it will be adjusted to the actual amount based on the results of the financial statements after completion of the audit and then adjusted to the 10 year plan basis of accounting. And there's a, as I mentioned, the list of potential items you would adjust it for. This is just a history going all the way back to 2013 showing that that process of amending our cash in February is very normal. There's one exception that's highlighted in blue that was actually adjusted at the year end point in September of the prior year instead of in February. But every other time this kind of normal pattern that I described has been followed where we're adjusting cash in February of the subsequent year after we complete the audit. But it is based on the previous year's ending cash. So moving forward into kind of some historical budget and financial information, first here I just wanted to say, you know, the basis of your financial planning is the assumptions that it's built on. And one of the decisions that was made by the previous city manager was to lower these long term assumptions. As you can see there, in fiscal year 2019, the kind of standard assumption for property tax was changed to 2 and a half percent. And property tax went through kind of a couple variations there, starting at 4% and then ultimately lowering to 3%. There's some minor changes in there, but as mentioned, this is based on more of a historical average that was used during the, during those years. Finally, I thought it would be important based on the document to have kind of more of an in depth conversation about the process of modifying sales tax. And so the first time sales tax was modified was in February. Significantly modified was in February of 2022. At that time we had almost two consecutive years of growth. There was a 16% growth from fiscal year 20 to fiscal year 2021. And then if you go back and listen to my, the presentation I made at the point that we gave this presentation, we were actually up 9% year over year through January. And we took that 9% and then said, hey, it's going to go back down to 2.5% normal growth the remainder of the year. And we reset the starting point of the number at that time. As I said, there were two years of growth, almost two years of growth. We ended up finishing that fiscal year. The next couple slides will show that right on target of that increase. And we didn't change any of the long term assumptions. And so on this graph, this was a graph that was presented on February 17, 2022. The Green Line was the original forecast. And then at that meeting we were recommending increasing it to the purple line. That's for sales tax. And then the bottom area there is tote. And same kind of process was used for tot, just analyzing what was happening in that current fiscal year. Obviously the ramifications of ToT, just given the size of it, are much smaller than the ramifications of sales tax. But this was kind of that first amendment to sales tax that frequently gets discussed. And the next slide actually goes into. Not to say that Muni Services is a projection we always use, but it is a useful reference point. The City of Redding does not employ any economists. Muni Services does have economists. We actually are offered to attend different lectures they have on the economy and the state of the economy, but at that same time they have the forecast that's in kind of the left column there, which was greater than the forecast that was ultimately recommended in February and that the budget was amended to. I also think it's important that there were conversations had between myself and the city manager discussing because of two straight years of absolutely blowing our projections out of the water, it became obvious there was some type of amendment necessary. But to what degree? And through those conversations I was presented to council and ultimately approved by council in February of 2022 as to what level those would be increased to. This is an update, just kind of walking through the timeline here of sales tax and sales tax results and other tax results in September of 2022. And so sales tax actually beat the updated forecast that we just discussed. And TOT actually beat the updated forecast by a million dollars. We did not increase these revenues because, you know, we believed we were on the right track at this point in time. I'll say that the very next meeting after that I went back and listened to these meetings. And the very next meeting I started it actually by saying there's a little bit of a tone shift happening. And at that point there was a few months of data, three or four months of data that was suggesting that there was some softening in our sales tax numbers. And I would frankly offer ever since then we've been kind of chasing these sales tax numbers downward. And so that was in November, the conversation I just mentioned. But this was the update that was done on February 16, 2023, where we are actually doing the budget workshop for fiscal year 24 and 25. And as you can see there, the blue line on this graph is the kind of prior sales tax assumptions. And the city manager presented the red line and the new recommendation, as you can see there, it relied on a 4.5% drop in sales tax and then 2.5% growth. And at the time he presented some hope of some rebounds out there in the out years of 4%. Ultimately this led to our next update in February of 2024, which is after the budget gets adopted. Six months into that budget, it's very obvious that things were not coming in to the expectations of the model. And this graph over on the very left shows that sales tax is under projections through December by almost 600,000 and through January by 1.2 million. I do think it's important to stop and talk about there were also some things just changing categorically about sales tax. Right about 2022, Amazon, late in 2022, early 2023, Amazon actually changed the way they were reporting sales tax. So Amazon used to report sales tax into what's called the county pool, of which the city of Redding gets anywhere from 70 to 75%. Amazon switched it to where they now report the sales tax on their warehouses through that city or that municipality. And so that ended up costing the general fund somewhere in the neighborhood of five to six hundred thousand dollars per year according to Muni Services. And so while we were seeing this kind of changing of maybe the local economic, the sales tax information, there was additionally these inputs that were outside anybody's known control. And frankly there are things that get discussion at state legislature level regularly. And we hear regular updates from Uni Services as to the status of that. But in February again it was very obvious that the information was deteriorated, the financial condition was deteriorating. Thankfully property tax was above projections, helping to mitigate some of that impact. And at this time, when I listened back to the meeting, it was very clear that there was a warning to council that future cuts were coming ultimately resulting in the meeting on May 21. There was a quarterly update on May 21, 2024, where again I talked about the underperformance of sales tax. But important, another important item on that meeting was the city manager recommending $4.5 million of cuts, including 12 firefighter positions, nine police officer positions and a number of other items to the actual budget. As we forecasting in towards the next budget, the goal was to use attrition to basically not have to do layoffs to meet some of those expenditure savings in the future. So then the update that was performed in 2024 was this was the graph that was used on September 17, 2024. And just to orient everybody a little bit, the dotted line is the adopted budget and the dashed line is kind of the new forecast that was being recommended at this meeting. And so yet again we were coming to council and reducing the revenue expectations. I typically like to contextualize this that, you know, our plan uses assumed rate of increase and as you continue to go negative or flat, even you are behind the plan. And so this was an update again to kind of reset the 10 year plan and make sure that the 10 year plan was accurately forecasting the information into the future. And this included actually all of the major revenues. And as you can see there, there was actually an adjustment upward of the property tax revenue. So with that history kind of covered, this is the actual sales tax that's happened from fiscal year 2015 to fiscal year 2025. This is that roughly 3.4% growth that I mentioned over those 10 years. And then this next graph actually gets into just a quick overview of how does all that information that we talked about from the time it was amended to the to the current budget that was adopted. What happened with the kind of forecast around sales tax? As you probably caught on to, there was other changes going on. But sales tax is the largest revenue of the general fund. That is a tax revenue and can be used on anything council wishes. And so this revenue has a substantial impact to the level of service that's provided to the community. And so the green, the blue line there is the actual that I just showed on the last graph. The green line was the amended budget in February of 2022. And then about a year later, the purple line was adopted about a year after that. But a little over a year after that, the blue line, about a year and a half, roughly after that, the blue line was approved by council. And then with the current budget is the orange line. Effectively right now, I would say based on the results of FY25, there's a pretty good chance we're already trending below that line. And it'll be something for council to continue to monitor as we go forward with quarterly updates and mid year updates. So next I wanted to go through a brief history of the fiscal year 24 and 25 budget. When the budget was adopted, there was a deficit in fiscal year 24 that was communicated to council of about 1.7 million and in fiscal year 25 of 2.1 million. Then. So that totals over the life of the two years about 3.9 million. In February, we decreased cash by 1.5 million. There were resolutions over the course of the two years that total for increasing expenditures of about 5.1 million. There were resolutions decreasing revenues based on the, as I mentioned a couple slides ago, the update to the forecast in September of 2022, which decreased revenues by about 1.9 million. Ultimately, at this same timeframe of September, there were some modifications put into the budget to try to make sure this financial plan was accurately representing the future. And so there were MOUs that were approved by council roughly to total of about $3.8 million annually. And this was the staff's best attempt, as approved by the city manager to place an increase of expenditures of 2.9 million to hopefully give an accurate representation to council of what the next biennial budget would look like. And then of course, trying to account for some of the savings that were included in that 4.5 million that were going to be achieved through budget cuts. And, and so those were all the changes that were made over the life of the two years of the ten year plan moving forward is the American Rescue Plan Act. This is an overview. The city received almost $18.7 million in two equal tranches over the course of two years, exactly one year apart. During the process of appropriating this money, all federal laws and regulations were followed regarding what's sometimes referred to as SLFRF money, state and local fiscal recovery funds. All the expenditures and modifications were approved by council and the expenditures have been audited for accuracy and compliance every year. Unknown whether it'll be tested this year. We're in that process right now with no findings reported. I know this graph is a lot of information, probably unreadable. But it just shows each of the approved items and the expenditures by year that were incurred. Next, there was some discussion around police officer funding. The actual approximate cost of with unfunded liability of a police officer is about $250,000 per year per officer. The number used in the document was $180,000 per year. I think this is a number that Barry sometimes used as shorthand to indicate the increase in a budget cycle for an officer. Because the way PERS change unfunded liability. We're going to probably talk about unfunded liability a little more throughout this presentation, but in 2016, I believe 2017, pers changed and kind of split off unfunded liability and made cities and counties start paying for it as a flat dollar amount, almost as a debt payment. And so at that time we switched our 10 year plan. But the important thing was that effectively, if you were to add or change your payroll, you still had to make that unfunded liability payment. The extreme example, if you had no police officers, there's still no police officers or firefighters, there would still be an unfunded liability payment to be made. And so the net increase of cost would only increase by the cost of the officer, plus what's called the normal cost or the cost of the annual benefits earned. This is important because the unfunded liability is actually a cost associated with the entire plan and not it's not easily attributable. Actually PERS doesn't even provide that information that it's how much unfunded liability applies to each individual employee. So it's a cost of the plan. And it's important to note that that's a cost of people who are retired from the plan or people who are actively working in the plan could have some amount of unfunded liability, depending on their proximity to retirement. That number could be more or less. And in a couple slides I'll get into a little more information about this, but that the actual number used when you're applying for grants or anything of that nature is $250,000 per position. Ultimately, there were nine positions funded through the ARPA funds, and that would be about $2.2 million a year. And break down there in fiscal year 2023, which was a partial year of the funding usage, only park rangers at that time was about 640,000. And then thereafter, right in line roughly with that 2.2 million, 2.3 was incurred in FY24 as we got Beat 8 officers hired and online and fully charging towards the ARPA funds. And then again in 2025, there's about 2.2 million across the park rangers and Beat 8. Beat 8. Important clarification, there were five additional officers added to each shift. The Beat 8 expenditures as I referenced on the previous slide, started in July of 2023, which would be fiscal year 2024. At that time, as I referenced before, it was pretty well known that the financial conditions were deteriorating and that in the long term, after the ARPA funds ran out, we would no longer be able to afford Beat eight. And so my understanding in talking to Chief Barner was that they decided not to actually go through the work of creating Beat 8, but instead having the additional staffing on every shift, which is staffing augmentation to the community, but no actual beat 8. And if anybody has any questions about that, Brian can answer those Questions later. So finally ending with the staffing and employee costs, just very quickly, I want to point out that all of these next slides are basically net changes from 2016 to 2026, effectively or FY26 with the adopted budget. So it spans a little over 10 years. Electric went up 19 positions. A lot of the position increases in electric and frankly the next few there are due to federal and state regulatory requirements and infrastructure needs of each of those major enterprise funds. There were some additional positions added to airports as they continue to have pressure on their workload. And those are funded by fees that are collected at the airport. Internal service funds. These are funds that are split throughout the entire city. Each of them have slightly different percentages of impact to the general fund. Building maintenance was increased by five positions. Communications was newly formed, so that's a plus three. And there's a variety of other increases. It's important to note all of these have different varying impacts on the general fund. And in some cases, the demand from enterprise funds was to get a higher level of service. I'll use Fleet as an example. There is a dedicated mechanic that I believe REU pays for because they wanted a higher level of service from Fleet. And so these are modifications to provide services to all of our city operations, not just the general fund. Next up is general fund. These are departments that have some sort of staff like funding associated with them. The bottom half of the list is the funding of the cost allocation plan. So again, those positions provide services to the entire city. But the top half of that list is either funded through their program revenues or different revenues associated to them. So in the case of streets, it's funded by gas tax. Engineering does work for all of the city departments. Finally, the general fund. Fire general fund. This is true blue general fund positions. Fire increased by 16. 15 of those are charged to REU for wildfire mitigation. Police increased by 26 positions. 13 had an associated funding source and 13 are funded from the general fund. Community Services administration increased by 1. Parks is probably the next largest on there and they had 21 position increase. Seven of those are wildfire mitigation funded and eight of those are funded by grants. And then there's other ones that were approved based on the impacts of new parks coming online. Specifically, some of our new parks are part of what's called landscape maintenance districts. And we have a responsibility of effort to those park facilities as a requirement of the general fund component of those parks. And then recreation is up two positions and the Redding Sports complex is up two positions. The next One there at the bottom is development services. They're up nine positions. Five of those were associated to new funding around code enforcement efforts with cannabis taxes, STRs, CDBG funds, a position and then the other ones actually are a result of more demands on service. What typically happens is building gets really busy, they tend to be understaffed. We're collecting a lot of fees and there's a requirement that you can't collect more fees than the expense to perform the service. And so there's a little bit of a back and forth that happens depending on the level of work that is being demanded of that department. Finally, getting to the MOU and wage modifications. These were all collectively bargained with the exception of the unrepresented updates. They were in line with Council Policy 206 which outlines competitive compensation. There were full compensation studies done in many cases and they were all approved by council with fiscal impact statements included. Importantly, and this goes back a little further than my history or my timeline does, but there's oftentimes some concessions that are part of those agreements, such as increases to health insurance cost shares, pers cost share and pars cost share. The goal of council has been to have employees pay 50% of their normal cost towards their pers and pars and 20% of the cost of the health insurance. Next, this was a graph that was presented by the previous city manager on January of 2022 that kind of shows relative to CPI and Social Security increases from 2007 to the current time, the kind of the flattening of wages and why there were wage increases happening. I'm not going to comment on it. I just think it's a useful data point as part of what was happening at that time. This is a list of the MOU modifications. If you read my report or are interested in my report, I'm not going to go over all of these, but it goes back all the way to 2021. There's links in the report. You can go review each of those modifications that were presented at the time. And there's video, not video links on these ones, but if you wanted to, you could actually go find the videos. Important to talk about employee compensation is just to understand what are employees paying and understanding the full compensation package and importantly how that might not be in alignment with every other municipality in our area. So employees typically are paying roughly 50% of the normal cost towards their CalPERS and their PARS. The most extreme example is our police officers pay about 19% towards our CalPERS. My understanding is that is Much higher than most other municipalities. Page 42 and 43 provide a detailed breakdown by union and tier of the different cost shares by each of the unions. And then every single mou now pays 20% of the group health per premiums. I also think it's important to know that city employers are not covered by Social Security. So they don't pay into Social Security and nor do we as an employer. Finally, unfunded liabilities have increased. I would just offer that these increase for a variety of factors. I'll get into the details of talking to our actuarial. What percentage of these were actually associated to wage and personnel increases? But overall from 2020 to 2025, the net across CalPERS, miscellaneous safety and PARS is a $40 million increase. I do like to point out PARS because you know, sometimes it feels like we're on a never ending journey with unfunded liability. But I will say prior councils and management have always made the decision to continue to pay pars on the original 20 year amortization schedule. And that actually has become fully funded as of our most recent valuation. And so just to discuss again, what is unfunded liability? It's a cost of the plan. So simple ways, there's less assets available to the plan than there are liabilities and effectively we have to pay that difference. Typically that's amortized over 20 years now. And just for context, our miscellaneous plan is currently at a funding ratio of 64%. Our safety plan is at a funded ratio of 61%. And our pars, as you can see there is over 100% funded now. And so this is a cost of retirees and active employees. Particularly there would be more unfunded liability associated to active employees. But PERS does not provide us any breakdown by employee. And as I say it's a cost of the plan. As I was talking as I was working on this, I reached out to our actuarial and I asked the question how much of the increase is associated to pay changes? And her answer was that it's pay in total. So if you add new positions and or give raises that are in excess of the persumption of 2.785% then there will be an unfunded liability. The, the important context here is that is one measurement of mini measurements that PERS is measuring against actual results to determine if it came in over under the assumption in any given year. And then from time to time they do change those assumptions. The most significant of which was back in fiscal year 2017 they changed their discount Rate assumptions in the future. And so of that I, through talking to her, I found out 31% of the increase through fiscal year 2024 was associated to wages. 50% of the increase through FY25, which is what's on the screen here. And I only brought up those two numbers because it shows some of the potential volatility that can be referenced in those numbers. And we will continue to monitor as we move forward into the future. And with that, I'm going to take a drink of water. Thank you all for your time. >> All right, everybody take a drink. Ready? Public comment. Did I read this thing already? Yeah. Denise Maxwell, you're up first. Mike Quinn, you're on deck. Pamela McNeil, you're number three. >> Good evening. My comments are also going to focus on the 22, 2022 tax year because that is where I think the misstep possibly occurred. It was in February 17, 2022 that a special meeting was held and items 3A and 3B were brought to council. >> Could you pull that mic down to your mouth so I can put it? Yeah. Thank you so much. >> And items 3A and 3B were brought to city council. Item 3B was entitled Consider Approval of New Expenditures for the City of Reddings General Fund. In the background analysis section of the report, the city manager informed the city council that current revenues had outpaced budgeted revenues significantly and they had probably mostly due to Covid. He also stated that it is that expectation that moderate growth would continue after budget adjustments were made. Then he went on to suggest expenditures which were laid out in the report year by year and averaged 3.6 million per year to 8.9 million per year. It was in March, March 15 of 22 that the 10 year plan was adopted, readopted, I should say, from the budget year. And in that plan, the forecasted revenues increased. Revenues were 3.9 million in year two of the budget. And the error that I think got made was that 3.9 million, almost 4 million, was carried into year three of the ten year plan. And once it got into year three of the ten year Plan, the increases that Mr. Robinette talked about of 2.5% were then applied to it. So it not only went into year three of the budget, but it also went in with a 2.5% increase. And then that increase was carried out throughout the 10 year plan. The same thing happened with TOT. The TOT amount was 1.9 million and that increase got carried out into year three plus an additional 4%. And year after year it went up additional 4% in council member Audette's report, chapter four. That is where she talks about the general fund getting $65 million of revenue just with these two adjustments alone. And that set the tone for creating a very healthy reserve with plenty of room to make increased expenditures for things like raises and new positions. 19 new positions, I believe were approved with that very one step move. Unfortunately, it appears that the healthy reserves created by carrying these increased revenues in this 10 year plan did not also carry the council approved expenditures throughout the 10 year plan. The fiscal impact section of the City Manager's item 3B did mention that the budget resolution for the increased spending would only cover year one and year two. >> Okay, thank you. We appreciate it. We got a long way to go. Sorry. Mike Quinn, you're up. Pamela McNeil. >> Mike Quinn, citizen, former finance officer in McLeod may laugh a little bit and say McLeod to Redding. Redding's just McLeod on steroids. Same funds, same enterprise funds, government funds, same budgeting, everything just smaller numbers. So I was interested when I saw what Ms. Odette put out and started looking into it. One thing I noticed right away was you don't budget your balance sheet. You don't budget your balance sheet, you're not going to know where you're at. You're never going to know how you're going to get to the proper net change in financial position, because that comes from a balance sheet. And there's balance sheet items that do not appear on your basic, your income statements. And a lot of that has to do with reserve accounts, earnings from reserve accounts and things like that. So you've got to be careful doing that. On the unfunded liabilities, I found that the town of McLeod had $3 million, $6 million unfunded liabilities. But I found a way around it and it's something that City of Redding has not done. CEPPT plan, we reduced one set of them, which was the OPEB, by 2/3 in three years just by putting some money from one, our reserve account into a PERS reserve account. We never lost control of it. We could write, we had a checkbook we could write on it anytime we wanted to. And they took the amount and discounted it, the amount we're going to have. So we started out with 3 million. In three years, we were down to 1 million. If you'd have done the same thing here, you're right now at 60 million with your OPEB that's been available since 2017. Two years ago, they went for the retirement account CEPPT plan, exact same thing is going to happen. You put money from your reserve account into their reserve account. You're earning. You get to choose what type of plan you want to earn on and it starts reducing it immediately. They say because you recognize the fact that you have unfunded liabilities, you get a better discount rate on it and the money goes down. When you get to a certain point, it's going to start paying for itself. So you don't. It's a cash flow item only is going to show up on your balance sheet. If you don't budget a balance sheet, you're never going to see these types of things that happen. So I was very impressed. So, dad, I never agreed with a lot of your votes, but the fact that you did this, you know, from a financial point of view and stuff like that, and I've talked with Mr. Robinette about some of these things too. It's just things that we need to talk about. And thank you very much for doing that. >> Thank you. Family, you're up next. Nick Garner, you're on deck. >> I'll pass, Jack. >> Okay. Gary Perrott said that. >> Good afternoon, city council members. I've been a citizen of Redding all my life. I've seen lots of changes, lots of council members, some good, some bad. But I have to give you a lot of credit for your transparency today. I just found out about this meeting this afternoon, so I'm ill prepared on some aspects. What I'm here to say briefly is I object of you raising a sales tax because whether or not you carry the mistakes of the history and past of how the city was run is what we do moving forward. And again, I commend your display of transparency. But government is changing today and so are the people. And what do we want? What do we want to say to our children and future citizens? And I don't think this is where we want to go. Our population has decreased. What isn't transparent is salaries. I'd like to put up on a billboard on Eureka Way in Hilltop Drive the salaries of the top city employees because they're hefty and they've been hefty in the past. And what isn't transparent is the pensions that were hefty and we're making up for it. And granted, what you're planning is fabulous, but we have