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FY 2025-26 Budget Workshop #1 Council Conference Room Thursday, February 20, 2025 | 4:00 p.m. 1. Resident Budget Survey Feedback FY 2025-26 Resident Budget Survey Foundations Agenda 3. FY 2025-26 Preliminary Budget General Fund Forecast Inflows and Outflows Major Revenues/Expenditures and Drivers Public Safety Personnel Retirement System (PSPRS) Preliminary Capital Improvement Plan (CIP) Overview Preliminary Property Tax Discussion 4. Key Budget Dates & Closing remarks 2. Financial Policies and Considerations FY 2025-26 Economic Updates Strength in Numbers FY 2025-26 Budget Theme Our Vision We are a world class city that provides an exceptional quality of life Chandler Budget Process Timeline New Fiscal Year 2025-26 begins 7/1/2025 This year’s theme: Strength in Numbers Council/Resident Process Staff Process Resident Budget Survey Feedback The survey ran from November 25, 2024, through January 10, 2025 CAPA assisted with a video ad campaign to encourage participation Continued expanded the outreach on social media Additional facilities provided paper copies, signage and survey QR codes and postcards Encouraged participation with Boards & Commissions, Recreation and Library users The survey consisted of 19 total questions and was offered in English, Spanish, and Mandarin Funding Priority questions were added to the survey to better understand chandler residents top four priorities for operating programs and capital projects Each focus area was allotted 1-2 questions on the full survey, each with a comment box for written responses FY 2025-26 Resident Budget Survey 1,343 (1,135 prior yr) Survey Participants Survey Comments 2,474 (1,350 prior yr) Budget Survey Results Quality of Life Provides residents a convenient way to share feedback regarding City services, amenities and infrastructure that are important to their quality of life in Chandler Good Tax Dollar Return Overall City Services Very Good, 47% Good, 46% Neutral, 6.0% Strongly Agree, 18% Agree, 50% Neutral, 26% Very Satisfied 24% Satisfied 56% Neutral 16% 99% 94% 96% Budget Survey Results I Feel Safe in Chandler Chandler Fire Would Provide Quality Care Strongly Agree 26% Agree 58% Neutral 13% Strongly Agree 49% Agree 40% Neutral 11% 97% 100% Budget Survey Spending Priorities Capital Projects Theme # of Responses Social safety net services funding (Housing, Behavior Health, Seniors, Employment, etc.) 634 Enhancements to Public Safety services or personnel 580 Improved park / athletic field maintenance 539 Programs to address homelessness 504 Operating Programs and Services Theme # of Responses Increased amenities in existing neighborhood and community parks 668 Bike lanes and trails 552 Public Safety Facilities (Police and Fire) 546 Enhanced street repaving program 478 Budget Survey Comment Themes (Top Three) Community Safety Police Presence and Patrol (89) • Major Themes Include: Appreciate visible patrols, quick response times, regular neighborhood presence. Would like to see more police presence, need more patrols in neighborhoods, need more traffic enforcement. Traffic Safety and Enforcement (72) • Major Themes Include: Good response to accidents. Concerns about speeding, red light running, school zone safety, street racing and dangerous driving. General Police Performance and Interactions (68) • Major Themes Include: Professional service, courteous officers, good experiences, trust in department. Some concerns about officer attitudes, poor response to reports requests. Budget Survey Comment Themes (Top Three) Connectivity Bicycle Infrastructure (87 comments) • Major Themes Include: Appreciation for existing bike lanes and paths. Like the recent bike path extensions. Good incorporation of bike lanes in newer streets. Need more protected/separated bike lanes. Current bike lanes unsafe due to proximity to fast traffic. Need better connectivity between bike paths. Bike lanes need additional maintenance. Need more off-street bike paths. Public Transportation (85 comments) • Major Themes Include: Positive feedback about Chandler Flex service. Appreciation for current bus service where available. Support for existing transit options. Need enhanced service in south Chandler. Need more bus routes and frequency. Need better bus stop amenities (shade, seating). Service hours too limited. Transit takes too long compared to driving. Road Infrastructure & Maintenance (76 comments) • Major Themes Include: Appreciation for recent repaving projects. Good street maintenance in some areas. Well-maintained major arterials. Starting to see more potholes. Construction projects take too long. Traffic signal timing could improve. Budget Survey Comment Themes (Top Three) Economic Vitality Business Growth & Economic Development (95 Comments) • Major Themes Include: Appreciation for attracting businesses, particularly in tech and semiconductor industries. Support for Chandler’s competitive position in economic development. Calls for more small business support and incentives. Concerns over too many chain stores and lack of local business diversity. Seems to be more and more empty office spaces. Housing Affordability & Development (55 Comments) • Major Themes Include: Support for continued growth to meet demand. Calls for balancing commercial and residential development. High housing costs making Chandler more unaffordable. Fewer apartment developments and high-density housing would be preferred. Concerns that new developments are harming Chandler’s character. Chandler Airport Expansion (48 Comments) • Major Themes Include: Support for extending the runway to attract business aviation. Calls for using the airport to generate more economic opportunities. Opposition to airport expansion due to noise and environmental concerns. Concerns that the airport benefits a small group rather than the broader community. Budget Survey Comment Themes (Top Three) Neighborhoods Housing Development & Affordability (115 Comments) • Major Themes Include: Support for a mix of housing options, including single-family homes, town homes, and condos. Appreciation for efforts to increase housing supply to meet demand. Calls for more affordable housing for seniors and young families. Some opposed to apartment construction, particularly high-density developments. Concerns about rising housing costs making Chandler unaffordable. Concerns that affordable housing and Section 8 developments will reduce property values. Code Enforcement & Neighborhood Maintenance (98 Comments) • Major Themes Include: Support for city-led clean-up programs, including alley maintenance and bulk trash pickup. Appreciation for effective code enforcement. Calls for stricter enforcement of signage and business advertisements on residential streets. Concerns about vacant lots, abandoned vehicles, overgrown yards, and poor alley maintenance. Neighborhood Infrastructure & Safety (72 Comments) • Major Themes Include: Positive feedback on well-maintained roads, street lighting, and public spaces. Support for increased shade structures and landscaping improvements. Appreciation for efforts to keep neighborhoods clean and safe. Concerns about seeing more potholes and deteriorating streets. Older neighborhoods seem neglected while new developments receive attention. Calls for better traffic enforcement and solutions for congestion from overdevelopment. Budget Survey Comment Themes (Top Three) Quality of Life Parks & Recreation Facilities (150 Comments) • Major Themes Include: Appreciation for the variety and accessibility of parks and recreation centers. Positive feedback on aquatic facilities and sports complexes. Support for continued investment in recreational programs. Concern that older parks need maintenance and updates. Requests for better upkeep of public restrooms and amenities. Aquatic Facilities & Pools (65 Comments) • Major Themes Include: Appreciation for existing pools and aquatic programs. Requests for more aquatic facilities, including indoor and year-round pools. Concerns about overcrowding at pools, especially in summer. Issues with limited hours, maintenance concerns, and lack of shade. Pickleball & Sports Facilities (50 Comments) • Major Themes Include: Support for expanding pickleball courts and other recreational sports options. Requests for more sports fields, including soccer and baseball fields. Seems to be some over- prioritization of pickleball over other sports. A few complaints about outdated or under-maintained sports facilities Budget Survey Comment Themes (Top Three) Sustainability & Technology Water Conservation & Quality (92 Comments) • Major Themes Include: Support for water conservation efforts. Appreciation for Chandler's water planning. Calls for expanded reclaimed water use. Encouragement for sustainable landscaping incentives. Concerns about water shortages and sustainability. Concerns with poor water taste and contamination risks (lead, fluoride, chemicals). Worries about excessive water use by businesses and new developments. Renewable Energy & Solar Power (55 Comments) • Major Themes Include: Strong support for solar expansion, including city buildings and homes. Interest in incentives for solar installations. Desire for more electric vehicle (EV) infrastructure. Some skepticism about green energy's cost-effectiveness. Some opposition to public funding for renewable energy projects. Recycling & Waste Management (30 Comments) • Major Themes Include: Support for better recycling programs. Interest in composting and separate waste collection. Encouragement for public education on proper recycling. Concerns about recycling program effectiveness. Frustration with limited bulk pickup options. Financial Policies and Considerations Quality of Life Sustainability & Technology Economic Vitality Strategic Framework Guides Decision Making Our Brand: A safe, diverse, equitable and inclusive community that connects people, chooses innovation and inspires excellence. Focus Areas: Community Safety Neighborhoods Connectivity Strategic Framework Guides Our Decision Making Operating Management * Capital Management (Jan. 2016) Reserves (Apr. 2023) Debt Management * Long-Range Financial Planning (Jan. 2016) Grant Management * Investment* Accounting, Auditing, and Financial Reporting * Pension Funding * (annual update; March 2025 Council Meeting) Financial Policies (*Revised and updated by Council February 2024) Chandler’s 9 Financial Policies Institutionalize Strong Financial Management Practices FY 2025-26 Financial Considerations Spending on COVID relief funds (ARPA, ERA, etc.) fully encumbered and decisions on related ongoing levels is again a topic in the new year’s budget. Growth of sustainable (ongoing) revenue is expected to grow at a slower rate locally and at the state level. Full Residential Rental legislation impact is incorporated. $5M ongoing in the current year and another $5M impact in FY 2025-26. Development revenues lower on single family residential. Expect future development to be infill and redevelopment. Economy has seen supply chain issues continue to ease, but inflation is still a concern. Federal Reserve monetary policy is being closely watched. Possible recession or self- inflicted downturn remains in most economists’ predictions due to lower consumer confidence. FY 2025-26 Financial Considerations (Cont’.) Potential State Food Tax ballot provision could be a loss of up to $17M ongoing revenue; will be monitored. Length of grant funding freeze by Federal Government and what will be finally impacted unknown. ARS personal property tax methodology change caused a decline in current assessed values. Unknown impacts of implementing Tariffs. (Chandler’s Foreign Trade Zone Businesses will see limited or no Impact) Potential federal elimination of Tax-Exempt Bond Status will be monitored. National Economic Indicators Economy reflects mixed signals with Fed actions helping but labor cooling National Inflation is hovering at 3% Source: Investing.com as of January 2024 Inflation is near Fed goal, but uptick seen in Jan ‘25 Source: U.S. Inflation Calculator as of December 2024 CPI Lower Inflation means prior year high spending remains, but new increases are lower Maintaining services levels requires higher spending CY 2000 to 2024 where $1 in 1984 is $1.00 in 2000 was under $0.60 and is currently $0.31 Capital Plan Inflation Impacts Data source: The Mortenson Construction Cost Index is calculated quarterly by pricing a representative non-residential construction project in geographies throughout the country. Construction Costs continue to go up, just not as fast Construction Price Index’s new normal Bond $ needs evaluated for bond questions Bond election passed National Recession Gauge showing mixed results Source: St Louis Fed and Y Charts.com Currently not including recession in forecast, although monitoring Local Growth is still projected Source: University of Arizona’s azeconomy.org as of December 2024 Ready to issue Permits numbers as of February 1, 2025 (106) Total Building Value in permits ready to issue: $149.8M Chandler maintains AAA Bond Ratings from Moody’s, Fitch, and S&P rating agencies for GO Bonds and ETRO • Continued adherence to all fiscal policies & strong reserves • Re-affirmed and improved ratings in 2023 Chandler is structurally balanced • Ongoing revenues support ongoing expenditures • One-time revenues support one-time expenditures Chandler maintains strong reserves • 15% General Fund contingency reserve • Recommend Budget Stabilization Reserve at $10M Chandler manages expenditures to meet service demands • Maximize grant opportunities • Weigh positions vs. contracting • Continue Modified Zero Based Budgeting to verify funding requirements to provide services Property Tax Options • Provide options to match expenditure needs or right size Sound Budgeting Practices Support Financially Sustainable Goals FY 2025-26 Preliminary Budget FY 2024-25 General Fund Operating Revenues and Expenditures Annual Inflows Annual Outflows 86.5% Local taxes and licenses and State shared revenues 11% Other Charges for services (i.e., parks, rec., building, planning, library) 2.4% Primary Property taxes 60.3% Ongoing Personnel (Wages/Benefits) 19.2% Ongoing Base Budget (i.e., Ops./maint., supplies, utilities) 20.5% One-time & other needs (i.e., PSPRS, consultants, pilot programs) If Revenues exceed Expenditures, General Fund Balance increases Based on FY 2024-25 Adopted Budget (reflects 81% of revenues as ongoing with the rest supporting one-time needs) Ongoing/One-Time Local Sales Tax (TPT) Preliminary Revenues 53.7% of FY 2024-25 General Fund revenue Sales tax revenues fluctuate due to economic volatility, including increases or decreases in development, inflation and consumer confidence Prior year legislative reduction of Residential Rental TPT began Jan. 1 2025 New & Expanding Employers Chandler Update chandleraz.gov/ed Financial Services 36,000 SF new HQ 90 jobs Retail 24,000 SF R&D/Manufacturing 147,000 SF new HQ 400 jobs Education 10,000 SF 100 jobs Retail 13,500 SF Healthcare/Life Science 90,000 SF facility 250 jobs Manufacturing 33,000 SF new HQ 50 jobs Adv. Business Svcs. 100,000 SF new HQ 400 jobs New & Expanding Employers Chandler Update chandleraz.gov/ed Semiconductor Svcs. 10,000 SF office 45 net new Retail 95,000 SF Semiconductor Svcs. 66,000 SF office 200 jobs Manufacturing 123,000 SF facility 100 jobs Manufacturing 200,000 SF 500 jobs Manufacturing Multi-facility project 400 jobs Manufacturing 75,000 SF facility 100 jobs Manufacturing 104,000 SF 280 jobs New & Expanding Employers Chandler Update chandleraz.gov/ed Manufacturing 76,000 SF facility 140 jobs Semiconductor Svcs. 38,000 SF expansion 100 new jobs Recreation Products 130,000 SF U.S. HQ 150 jobs Retail 220,000 SF Manufacturing investment 3,000 jobs Manufacturing 104,000 SF facility 230 jobs Manufacturing Expansion in campus 100 jobs IT Solutions HQ Relocation 1,500 jobs Key Local Sales Tax Revenues by Category Higher fluctuations (increased one-time) experienced during Intel expansions Source: Development Services population estimates 2024 Expanding Resident Base Population has increased 12.8% since 2017 State Shared Revenues (in Millions) 31.6% of General Fund in FY 2024-25 Requests just to maintain service levels are higher again this year due to high use of amenities, contract increases, and inflation Prioritize Ongoing Demands (Maintain > Enhance > New) $23M $9.9M All Funds net of offsets Ongoing Requests Net of Offsets One-time Requests Net of Offsets General Fund $13.5M Total of All Funds $16.1M General Fund $12.7M Total of All Funds $16.8M Total Decision Package Requests Net of Offsets: $32.9M New Decision Package Requests Expenditures “Outflows” Priorities for Ongoing Dollars 1. Maintain existing service levels within core programs and strategic focus areas including contract and other increases 4. Build the strength of our workforce to meet evolving resident expectations 3. Convert successful social safety net programs to ongoing funding from grants 2. Ensure sufficient ongoing funding for facilities and infrastructure including technology and security 5. New enhancements or additions, considering the option of one-time pilot programs first Effect of Revenue Growth on One-Time Fund Balance Includes additional $30M for Street program Priorities for One-Time Dollars 1. Maintain reserves sufficient to meet financial policies including PSPRS fully funded status 3. New initiatives and capital that generate sustainable ongoing financial savings 4. Focus operating & capital spending to move forward strategic focus area action items 2. Reinvest in existing aging infrastructure, systems, including projects that generate ongoing savings Public Safety Personnel Retirement System Update PSPRS Pension Update Tier 1 & 2 funded status increased to 94.4% combined: 85.9% to 94.1% for Fire 81.7% to 94.6% for Police Tier 3 funded status still over 100%: 109.5% to 109.6% for Fire 109.6% to 110.1% for Police Note: Current year $7M payment not yet reflected Chandler % Funded 2024- 94.4% 2023- 83.3% Based on current wages/counts, reduction for FY 2025-26 is approx. $9.7M which was estimated at $8- $10M PSPRS Employee/Employer Rates Comparison PSPRS Employee/Employer Rates Comparison Preliminary Discussion: Capital Improvement Plan (CIP) Current 10-Year CIP Council Guidelines Maintain secondary property tax rate flat Re-imagine resident amenities scheduled for replacement Prioritize aging infrastructure Finish planned construction of streets, parks, fiber and utility systems Prior to adding capital, ensure related ongoing O&M can be supported Utilize master plans to guide long-term capital investment Ensure sufficient bond authorization exists to complete projects desired by residents Balance timely completion and coordination of capital projects with impacts to neighborhoods and businesses Fiscal Foundations – “Strength in Numbers” Prior Year Bond Requests in Today’s Dollars Continued Focus on Chandler’s Aging Infrastructure Maintaining high quality of life for our 287,357 residents 65.7 square miles 2,090 miles of streets 28,515 Street lights 229 signalized intersections 1,240 miles of potable water lines 1038 miles of sanitary sewer 69 developed parks (1,317 acres) 51 lighted fields 61 municipal buildings 821 fleet vehicles/ trucks 32 operating wells Inflation has eased but costs still increasing Bond authorization needed and election process is in progress As studies and project design are completed, some CIP project costs may adjust Prop 479 extension passed but with some adjustments to grant funding of projects causing more local contributions on some projects Capital Project Review in Workshop #3 New Year CIP Considerations Assessed Values Not Yet Received Preliminary Property Tax Discussion Property Tax Rate Comparison Per $100 of Assessed Value Breakdown of $1 of Typical Chandler Property Tax Bill City of Chandler 11 cents Public Schools and Community College Districts 70 cents Maricopa County & Special Districts 19 cents *Based on 2024 Tax Bill information. Exact split will vary depending on the school district and any other special taxing districts on the bill. Property Tax Assessed Value Comparison House Bill 2822 went into effect this assessment cycle which reduced the value of new tangible personal property the tax is assessed on. Old assessment practice was to assess on a variable percent value of the asset less depreciation (Yr 1 25%, Yr 2 41%, Yr 3 57%, Yr 4 73%, and Yr 5 89%). The new valuation is 2.5% of asset value per year. Primary property tax rate has been reduced for 9 consecutive years ($3.5M in ongoing tax reductions) 54 • Due to assessed values small increase, truth in taxation rules will not apply • Maintain secondary rate to deliver commitments made in bond election • Evaluate Primary Rate options • Reduce $0.01= $412,425 ongoing reduction • Leave overall rate flat, keeping primary (+$34,449) and secondary (+$140,972) unchanged Property Tax Policy Options and Considerations Key Budget Dates Budget Event Date Council Budget Kickoff Completed 10/14/24 Citizen Budget Survey Completed 1/10/2025 Council Workshop #1 Tonight 2/20/2025 Council Workshop #2 03/24/2025 Council Workshop #3 CIP Focused 03/27/2025 All Day Budget Briefing 05/2/2025 Council Meetings Tentative Adoption 05/22/2025 Public Hearing and Final Adoption 06/12/2025 Adoption of Tax Levy 06/26/2025 Questions?