A major topic during the meeting was the proposed establishment of a fee-based funding mechanism for the city’s fire district. This idea aims to create a dedicated revenue source for fire suppression operations, which could potentially allow for a reduction in the current millage rate. Council members debated the necessity and implications of implementing such a system, expressing concerns about potential state-level changes to property taxes and the impact on local government funding for essential services like public safety and infrastructure.

One council member voiced skepticism about the need for the fee-based system, questioning the rationale behind its introduction. Another member highlighted the broader concern that reductions in property taxes by the state could necessitate alternative revenue sources for local governments or lead to significant service cuts.

The proposal involves conducting a technical study to determine the specifics of the fee structure, which is expected to take six to eight months and could cost over $100,000. This study would provide insights into the appropriate methodology and rate for the fee, considering various factors. The conversation acknowledged the importance of preparing for potential revenue reductions from the state, which could create funding challenges for the city.

While the fee-based system would not fully fund fire operations, it aims to establish a dedicated revenue source, acting as a “release valve” for financial pressure the city may face in the future. The state legislature’s history of proposing revenue decreases was noted, with a recent adjustment impacting the city’s revenue by $40,000. The council discussed the timing for potential implementation of the fee system. However, there was no immediate consensus to proceed with the study.

In addition to the fire district discussion, the council addressed the fiscal year 2025-2026 budget, with a focus on a police annex bond issue. Following discussions with the city’s bond council, it was deemed inadvisable to proceed with the bond issue in the upcoming year due to expenditure requirements that do not align with the expected timeline for spending. The three-year arbitrage period is not anticipated to commence until mid-next year. The council was assured that sufficient funding exists from various sources, such as the general fund, ARPA interest, and police impact fees, to manage through this interim period without reducing the millage rate.

Further details on the budget were provided, with projections for the fiscal year ending balance estimated between $16.5 million and $17 million, exceeding both the Government Finance Officers Association’s best practices recommendation and the city’s internal policy. The total amount available above the policy balance is approximately $10.5 million. The council discussed revenue projections, noting an expected increase in ad valorem revenues by $1.6 million, driven by a 7.5% property appraiser’s update. Utility taxes are projected to rise by about $175,000, while licenses, permits, and fees are expected to increase slightly.

On the expense side, general government salaries and benefits are projected to rise by 4%, with specific figures for police and fire department salaries discussed. Health insurance costs have decreased, resulting in a $213,000 reduction in budgeted expenses. However, there is a forecasted 10% increase in workers’ compensation and general insurance costs. Concerns were raised about property insurance trends, especially in light of ongoing discussions about tort reform.

The meeting also covered the vehicle replacement fund, which saw a $79,000 increase due to a decrease in fund leases related to the replacement fund. The city programmed a reserve for contingency amounting to $400,000, resulting in a total expense budget of $41.88 million and a contribution to the fund balance of $99,000 from excess revenues. Transfers in from various utility funds were discussed, along with transfers out to the IT fund, the insurance fund, and the technology improvement fund, totaling approximately $1.44 million.