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FY 2026-27 Budget Kickoff with Mayor and Council Council Conference Room Monday, October 13, 2025 | 4:30 p.m. I. FY 2025-26 Budget Actions II. Budget Process III. Strategic Framework Focus Areas IV. FY 2026-27 Budgetary Impacts & Guidelines V. Capital Guidelines VI. Financial Policies and Budget Practices VII.Key Dates - Council Discussion Point Agenda FY 2025-26 Budget Actions • Sales tax rates unchanged at 1.5%- lowest in AZ • Reduced property tax rate from $1.0826 to $1.0818 per $100 of assessed value – 10th year of reduction • Planned changes to Water/Wastewater/Reclaimed & Solid Waste Rates to keep funds self supporting, while remaining one of the lowest costs in Arizona • Added increases to capital budgets to compensate for inflation affected projects, maintain aging infrastructure, as well as finishing planned parks and arterial streets • Continued to address pension debt through additional one-time funding (up to $25M)to maintain the paid off status off the Public Safety Personnel Retirement System (PSPRS) unfunded liability • Added funding for final year of labor association commitments and general employee pay increases • Added 18 positions, 14 of which (78%) were either converted from one-time funded to ongoing or have an offset from grants or other revenue • Maintains Budget Stabilization Reserve at $10M Where We Are in the Budget Process Kickoff allows for Council direction on Strategic Focus Areas, policies & guidelines before budget process begins & Resident Budget Survey initiated Decision Package and CIP recommendations submitted by departments in December Financial forecast, funding decisions brought to Council during workshops 1 (February), 2 (March) and 3 on the CIP/Utility Rates (March) Proposed budget brought to Council for discussion at All-Day Budget Briefing (May 1st) “Adding Sense to Dollars” FY 2026-27 Budget Theme Strategic Framework Guides Our Decision Making Focus Areas Economic Vitality Sustainability and Technology Neighborhoods Connectivity Quality of Life Community Safety Budgetary Impacts Personnel/Staffing • PSPRS unfunded liability continues its paid off status, anticipating additional ongoing savings • Making progress on reduced vacancies, especially in Police • Added positions will help reduce pressure in high need areas and shift one-time funded positions to ongoing • Use of Temps to fill short-term needs Local Economic Impacts • Local revenues in line with budget • Industrial construction impacts are winding down with one-time revenues declining. Use of past one- time generated ongoing savings. • New retail, entertainment concepts, and businesses continue to open. • State shared income tax have adjusted to new normal bringing better predictability but less one- time funding • Long tradition of strong financial management • Current AAA rating on GO and ETRO Bonds will be re-evaluated in November for new sales The Brightside Personnel/Staffing • New MOU agreement outcome must be sustainable • Retirement and vacancy impacts will continue • ERP system will require significant citywide staff effort/temp backfill Economy & Inflation • Costs, driven higher by prior year inflation, remain high; concern of recession continues • Bond Election in process with results unknown Technology • Multi-year citywide Enterprise Resource Planning (ERP) system replacement continues • Cybersecurity posture / Infrastructure • Governance / speed to delivery • AI mobility and flexibility Legislative Impacts • Legislative Impacts to local tax base and Model City Tax Code continue to be watched • Federal uncertainty for Neighborhood Resource programs • Impacts of unpredictable federal government The Challenges Budgetary Impacts • Chandler must remain fiscally resilient Delineating Ongoing vs. One-Time This year 83% ongoing GF TPT revenues and 18% one-time was budgeted Slight revenue reduction shows reduction in one-time revenues and residential rental tax removal Transaction Privilege Tax (TPT or Sales Tax) The History Fiscal Year (FY) 2025-26 Budgetary Impacts Evaluation is done for each TPT category and their ongoing versus one-time components Delineating Ongoing vs. One-Time The History Fiscal Year (FY) 2025-26 Budgetary Impacts 5-Year General Fund Ongoing FY 2023-24 Forecast Revenues vs Expenditures $10M Budget Stabilization Reserve Significant One-time payment to PSPRS was made which helped align ongoing expenses back under ongoing revenue Gap narrowing 5-Year General Fund Ongoing FY 2024-25 Forecast Revenues vs Expenditures $10M Budget Stabilization Reserve Once ongoing savings from PSPRS incorporated forecast got back in balance Gap narrowing 5-Year General Fund Ongoing FY 2025-26 Forecast Revenues vs Expenditures $10M Budget Stabilization Reserve Total revenues change with the ebbs and flows of the economy impacting primarily one-time revenues. Ongoing revenue is increasing at a gradual pace. Modest wage changes are estimated for years 2-5 and ongoing revenues continue to be within current revenue assumptions for structural balance. Gap narrowing 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 Focus Council 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 • Maintain secondary property tax rate flat • Reimagine 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 • Emphasize redevelopment infrastructure Capital Guidelines Maintain similar Budget Survey process to generate community involvement (1,135 for FY 2024-25 | 1,343 for FY 2025-26) • Run from Nov. – Jan. • Run ad campaign to encourage participation • Expand outreach on social media • Facility signage added with QR codes • Encouraged participation with B&C and Recreation/Library users • Offer in English, Spanish, and Mandarin • 15 questions, 1-2 in each focus area with comment box • Additional updates to questions or process? Resident Budget Survey • Operating Management • Capital Management • Reserves Debt Management • Long-Range Financial Planning • Grant Management • Investment • Accounting, Auditing, and Financial Reporting • Pension Funding Financial Policies Will review and bring to Council any recommended updates along with the required update for the pension policy Council Approved Budgeting Practices Support Financial Sustainability Maintain AAA bond ratings from Moody’s, Fitch and S&P (rating reviews in November) • Continue adherence to all fiscal policies Remain Structurally balanced • Ongoing revenues support ongoing expenditures • One-time revenues support one-time expenditures Maintain strong reserves • 15% General Fund contingency reserve • Budget Stabilization reserve Balanced expenditure growth • Focus on maintaining and/or modernizing existing services Evaluate Primary Property Tax 37 consecutive GFOA Distinguished Budget Awards FY 2026-27 Budget Process Updates Continued Modified Zero Based Budget (MZBB) • Ensures current budgets are right-sized based on services provided • Reviews services, related expenditure category spending trends, and line-items • Started with 5 departments/divisions done, 6 more in current year • Results reported at second budget workshop or all-day budget briefing Departments/Divisions in process: Law, Neighborhood Resources, City Manager (CMO, HR, Transportation Policy, Connection & Impact) Council Process changes implemented in FY 2025-26 Budget • List department accomplishments without making them the focus of the presentation • List all capital projects and decision packages, but focus presentations on the highlights • Additional discussion of timing of projects where policy direction may be needed • Hold All-Day Budget Briefing on non-Council meeting week • New process changes for FY 2026-27? Feedback Received Last Budget Process Additional Thoughts? Tentative Key Budget Dates Budget Event Date Council Budget Kickoff Tonight Resident Budget Survey with Outreach Videos Nov 2025-Jan 2026 Council Workshop 1 February 19, 2026 Council Workshop 2 March 23, 2026 Council Workshop 3 (incorporate how CIP impacts utility rates) March 26, 2026 All-Day Budget Brief May 1, 2026 Council Meetings: Tentative Adoption May 21, 2026 Public Hearing & Final Adoption June 11, 2026 Adoption of Tax Levy June 25, 2026 Public comment opportunities are now a part of all of these budget meetings Questions?