Mesa approves 1,000-unit Culdesac downtown mixed-use development amid $23M public safety budget pressures

[Music] well welcome everybody to our Mesa City Council on March 6 2025 and maybe we'll get some rain today and tomorrow the rest it'll be a good change all the members of council are present and we'll just Dive Right into business uh item 1A is here a presentation on culdesac development for the city-owned property the South West corner of University and Mesa Drive I'm assuming okay Jeff Ryan Jimmy thank you the time is now yours good morning mayor council good morning uh Jeff McVey manager of urban transformation today I have with me Jimmy trako um downtown transformation project manager I'm also pleased to welcome uh Ryan Johnson co-founder and CEO of of cesac to be able to talk about cesac today um but first we're going to kick off and and Jimmy's going to set the stage and kind of remind us how we got here today so in uh plate summer fall 2023 we went through the RFP process for uh new proposals for night for site 17 um we uh for the goal for that what you see on the screen they develop a vibrant active mix use neighborhood with public amenities that complements the neighborhood and sports downtown that grew out of the transform 17 guiding principles so for the RFP we had asked any submissions to follow those going forward um when we uh in October we had brought it to council for direction and uh the direction at that point was to proceed with cuaac um at that point we've been since then we've been working on development agreement purchase agreement and we've also done two appraisals of the land city has done one in culdesac themselves and the uh the cesac appraisal came at 9.7 million whereas the cities appraisal came came back at 11.2 million so that's where we are to work from Jimmy can I interrupt I'm sorry right off the first slide she starts oh my gosh um I just want to connect and we can go back to it later on this these appraisal prices versus what is and maybe I need to think about it it just came to mind on slide number I want to say 29 where it mentioned the price oh what's this one 29 yeah and phase one purchase price 2.74 million so I I just want to connect those two at some point yes yes we will for sure thank you and with that we would like to to hand the floor over to Ryan to be able to kind of present and give you an overview of who CU theack is and and uh the project that Jeff before we do that let's maybe Mr Brady you can give us a little history on you know yeah well transformed 17 let's start there I mean for those that are listening you know we've owned the property for quite a few years and I don't remember the that number of years but it's been quite a few and then we've had a number of uh proposals through the years why don't you give us an overview before Ryan takes over wow okay well even before I got here right this has been a property in the city that's been under L lots of discussion I know if we go way back in time at one point this was going to be the future site of hul Stadium it was going to be a spring training uh Stadium um and it went back it went back that far um then at some point and someone's going to have to help me I know there was a developer that came in and worked with the city to put in a water park Conference Center slw waterer Park water park and at that dur as part of that um the city did go in and um acquire the homes that were in this area um to make available or make that this area available for that development um after which the city had purchased all the properties um the developer declined to move forward with the development so here go that's kind of where then the city ended up holding on or having possession of all this land for some time there's been some um critique of the city's um efforts to do that and to acquire the land um I think it was maybe a modest income area but uh those area that area was uh purposely all those properties those homes I don't remember how many homes were there but was um acquired by the city for that um future development and after they had acquired the property the future development um declined to continue you can kind of just tell by the way you know the the streets are still there from when that subdivision was there so since I've been here so that was probably 25 years ago I believe late 1990s more than that 30 years ago um but since I've been here I know we have gone through multiple rounds of trying to work with a master planning and trying to find an opportunity uh to bring in developers proposals to develop this we've come very close the council's gone through multiple selection processes um but often we get to a point where um the developer just can't make it work pencil out as far as the the type of development there's always kind of a challenge working this is kind of in an interesting location um it's kind of on the I would say the very edge of the core downtown um it's across from the the Delta hotel it's a you know just south of a retail um Center but it's directly north of a historic neighborhood a single family um residential area that um is kind of just sits in that is it the Wilbur historic district am I saying that right and so we're always being sensitive to the type of development that would happen here and how it would um impact or mitigate or trying to make it consistent with that development and then looking at higher density as it moves towards University so it's it's been unfortunately for the last 30 years the city has not or maybe more has been working very diff working diligently to develop this 25 25 grow gr Acres 4 to five gross Acres of property um but we've just never been successful so here we are um again with another proposal and hopefully we can take this cross the finish line anyway that's all right thank you for the overview all right Ryan all right thanks Chris Jeff and Jimmy good morning mayor and Council I'm Ryan Johnson and I'm excited to share with you our vision for cesac Mesa which can bring energy and people to downtown Mesa and at culdesac we prioritize Community mobility and open space and I'll tell you a little bit about myself I grew up in Phoenix as a third generation family moved from Minnesota we because it was too cold you probably heard that before and when I was growing up Mesa was the most fun place in the world whether that was the Museum of national history or uh or the golf land Sunsplash or soccer matches but as I became an adult I realized how much it was really a pillar of this city and even underrated and today it has so much potential and we're really excited about being part of site 17 for downtown we have a number of team members we've got four uh we got four with us today and uh we have Decades of experience building projects all over the country and at culdesac our Flagship is culdesac Tempe we'll tell you a little bit more about that we also have two four sale town home projects under construction in Atlanta and Mesa is our next project and out of curiosity how many people have been to culdesac Tempe decent number I've seen some of you seen some of you there for the others I would love to show you sometime uh so so CAC now that it's open it's a vibrant place and we actually get more visitors every day than residents and it's brought up a lot of attention to Tempe because it's really shown a different type of housing that brings great amenities and the residents love it and the neighbors love it and will bring similar energy to Mesa we have an award-winning retail program uh we have full commercial leases we also have these live workspaces that have become Boutique shops this is a Japanese stationary store where they're all different they're all local and collectively it makes it a great place to visit and it lowers the bar for people opening up a brick and mortar store and it's created a lot more businesses as a result uh this is what it looks like this is a family biking through that lives there biking through it uh this project feels 15° cooler than the apartment complex next door because there's not a drop of asphalt the white reflects heat and there's lots of shade and it's a vibrant energetic place whether that's the residents having events this is our Plaza or people visiting to shop or to eat or one of the many events that we throw and I'll make a plug we're throwing a St Patrick's Day event on Saturday uh we're expecting over a th people and hope to see some you there and this is what inside the apartments look like uh we say people want a great neighborhood at a good price and now we have 288 units open the second phase just open in December we're already 86% leased and we have high renewal rates but the biggest question that we get is when can I buy one and that's what M is for uh it's a unique retail destination with over 20 local businesses whether that's Kina chiwas which is on USA today's list of best du restaurants in the country there's only three in the State uh Busan Mart it's a Korean market with prepared foods we also have a K-pop section and I know all of you are big K-pop fans uh we also have archers bikes which is a great ebike store and one of our small retailers one of our retailers is so used uh which has been a great success in in three parts they started with the pop-up table at our market then they opened their first brick and mortar store and now they have a full commercial lease with twice the space and they're still growing and we love our small businesses and we love even more when they become mediumsized businesses and how do we do it through strong public private collaboration uh we collaborate with cities on right sizing parking requirements we worked with the City of Tempe to uh show them the trends of of where things are going with Transportation uh and new Lifestyles also align with City's Economic Development priorities this is a barber they were the Last Tenant in a city city of Tempe owned property that they wanted to redevelop so we helped relocate them to cesac Tempe and I hope you like my haircut from them today uh we also helped the city get a Federal grant that was used for the uh for Street improvements is the Smith Road Improvement project and now let's talk about Mesa and we're so excited about the future of Mesa and here's us getting in the Met orical weo going from cuac Tempe to Mesa and how many people have tried a weo so far quite a bit of people um yeah so this is something that uh is going to be the biggest change to real estate of our lifetimes and it's uh it's only a matter of when but we're building for that future uh where we're at in you know the public realizing how big of a deal it's going to be is recently been hearing from lots of parents who now feel safe to send their kids to school and they they have a fusive praise and say now I I have my freedom back uh we first heard about site 17 because one of our first employees uh went to Westwood High School he was part of their Championship robotics team and uh as as we learned more about it this this is this downtown is has a very bright future with ASU all the new developments the great shop and we think we could be a big part of that and really augment what's going on and accelerate it and for what we're going to build there a th000 residential units across the site 25 to 50,000 square feet of retail and 25 to 50,000 ameni square feet and this is going to be a bold energetic Vision that brings more attention and people to Mesa uh with quality home ownership opportunities uh with right siiz parking and it'll bring a lot of small businesses and this is our vision to be a keyote not just of Mesa but of greater Phoenix uh that's a remarkable car light Hub that has home ownership opportunities it pushes sustainability grows talent and sets the standard as a leading development in Arizona and it's going to offer quality infill home ownership opportunities with strong ties strong ties enabled by Home Ownership it's going to have quality Urban Design and uh also we're going to have lots of Art and I know Mesa has lots of great art some of our artists have done pieces in Mesa and we'll have more of those on site 17 uh with a sustainable lifestyle aided by integrated features um and vibrant retail and let's talk about uh let's talk about the home ownership opportunities that create create long-lasting Community uh the first phase will have four seale 2 and three-bedroom Town Homes they'll be fee simple with dedicated parking spots and live work units that give people the opportunity to uh open up a a small business uh future phases we'll have additional types from Studios up to three bedrooms with varying structures from for sale to for rent and this is some of our design inspiration it's going to be quality Urban Design that draws on desert modern and historical Spanish influences and for that sustainable lifestyle there will be sustainable amenities available for residents uh the desert adaptive design it makes indoor outdoor living a reality talked earlier about how uh how we we moderate the Heat effect and it's a better quality of life not just for residents but for neighbors and we'll bring that vibrant retail is here whether that's popup tables live Works spaces so people can open their first brick and mortar store or full commercial leases and we remain committed to developing the Thousand units this was the the site plan you're familiar with and this is the phasing that you're familiar with and we've gotten a lot of feedback and uh We've we've been working on a lot with the team and wanted to share um share a little bit of that here so phase one with 144 sale town homes that piece is wider and you'll notice phase two so one of the things we've heard a lot is that uh people are excited about ASU having a stronger presence in downtown uh including with uh with housing and uh we've seen how much ASU did for Downtown Phoenix and really accelerated that I think we're in the early Innings of that here in Mesa and uh so we've been talking with them and we're not sure if or when we can get something done to have them part of it but we're designing phase two such that it could work with or without them this is going to be a project with lots of great pieces and would love to answer any questions that's been a pleasure working with the team and we're as excited as when we got started thank you R thank you Ryan uh Council any questions who wants to kick it off well if nobody does I I'll do it but goad Jen go ahead I have um some questions first of all you know the one I started with um tying in um and that's at on slide number 29 mayor council member Duff if you if you think it beneficial we could go through and walk through the business terms yeah and then and then take questions at the end if you think that's helpful thank you sure go ahead uh so Ryan Ryan painted a picture of a of a wonderful development and then he hands it off to us and we get to talk about the really fun stuff of the business terms of a of a purchase agreement a development agreement um to start um we want to make it clear that that we're structuring this um deal in a way to help protect the city as much as possible as well as to reflect the fact that this is a very large site and um it is not reasonable for us to expect that cesac is going to spend a bunch of money on engineering and design to be able to really flush out what is what is able to be there you know we've seen a concept design that we've all been working towards and that we're all um um happy that that's direction we're going but the reality is that once you get into final design it's going to change so we've tried to structure this in a way that's that gives called the sack the um the the the standing in the land that gives them the the confidence to be able to go and spend the money but still at the same time protect the city's interest so that we are not going to release the land without confidence that we're going to see the type of development that we're here talking about today so to accomplish that um we're structuring this in three separate phase uh three separate purchase agreements essentially phase by phase for each phase there will be the requirement that there's a a development agreement that is approved and executed on the site that that CAC has gone through every step that is necessary to entitle the property with zoning and and that they have actually obtained their building permits prior to to us actually closing on the sale of the land so at that point we will have um the knowledge and the confidence that kisac is able to move forward and we also have an understanding of their financial C capacity to be able to deliver the project before we ever sell a piece of dirt once we have closed on the property um called thec will have 24 months from that period to to execute the purchase agreement um I'm sorry they'll have 24 months after executing the purchase agreement to close on the property um that includes all of the due diligence time so that 24 months is the time that it's going to take to do the the zoning entitlements of the building permits um after they have closed on the property they have 12 months in order to commence construction on the project and council member Duff to your question the purchase price that we are showing there 2.74 million it's an estimate based off of the the square footage of the land that we think as we know it today it will it'll change a little bit as we refine the actual boundaries of each phase but that is reflective of the cesac um appraised value of 11.65 square dollar per square foot so that original amount was for the entire prop that was for the entire uh property yes okay let me look at that I don't know I I must have misread it because I thought it said phase one okay base one approximately 9.7 million City point2 maybe we have the wrong slides in this is um on slide number two yes councilwoman de slide number two that is the total appraised value for the uh the full project okay so not not not phase one oh okay see the one you're looking at and the one oh the one that's loaded has face was uploaded I'm sorry I was looking at my iPad and not paying too attention the screen I apologize okay got it so the phases are broken down by purchase price of the parcels and so phase one you're saying is 2.74 correct million to purchase that to take it down correct and then with um within they have from the time they close 24 months to execute the purchase agreement from the time from the date that we execute the purchase agreement there'll be 24 months to close to close Okay then after that another 12 months so we're talking three years three years yes potentially three years depending on how quickly we can entitle the property and how quickly the um callac is able to commence construction well that would be a question for Ryan yeah we'd like to break ground tomorrow is that okay okay are you continuing on or jump in yeah jump in I I was going to prompt you on the development agreement deal points assuming oh here we could all right because my what I made notes on last night was a little different than some here so I might be anyway yeah if you can just go through those sure um continuing on with the purchase agreement uh this again this is a a three-phase um project so we have set established a a so once uh call to set closes on the first phase they would have the option to um take an option on this next phase of the development that option would essentially have to be exercised on the date of closing of phase one so on phase one closing called theack will choose to whether or not they want to exercise the option on phase two if they choose to exercise the option on phase two they will U provide $100,000 option payment to the city um and then that would start the clock on a 36-month uh window for them to be able to entitle and um move forward with construction on the second phase uh there would be uh we are working through what they are right now but there will be prere prerequisites in order to be able to exercise an option on a future phase uh those prerequisites could include s such things as a certain percentage of commenc or completion of construction on the previous phase or or or evidence of financial capacity to be able to to develop the next phase or could be a combination of both um call theack is has uh been very um um bullish and and and we want to encourage that so if they have the ability to take down two phases at the same time we have provided we are going to provide the option should they be able to provide the financial capacity and show us that they can deliver both phases that they'll be able to take down phase two and three at the same time um a key note here is that we are still working through what purchase price what appraisal or which uh version of the appraisals that we are going to use as the to establish the future purchase price of phase 2 and three um we would base it off of one of the existing appraisals or blending of the two appraisals with an annual CPI CPI adjuster so so that if it's 5 years from now we'll have had five years of CPI adjustments to that apprais value and now with that I'm going to hand over to Jimmy and he's going to give us an overview of the development agreement next slide uh for the uh the development agreement the uh the minimum improvements uh we we've said as Ryan mentioned 1,000 units 140 of those are the for sale town homes that are part of phase one um buildings throughout the site will be two to five stories in height um and then uh the the minimum of 25,000 uh square feet of commercial retail space and then another 25,000 feet of residential amenity space um when Ryan presented a little earlier he said anywhere between 25,000 and 50,000 so it could be much bigger than that but that's what we said at the minimum um open spaces and green space that will both be um public and private um that we have not finalized how much of that space will be used but we're we're working on uh getting to a point where we'll know what the square footage is and then uh 800 to 1,000 parking spaces to accommodate the residents of the uh the project um on-site public improvements will include things like the the open space as well as streetscapes and Mobility so in order to get people around the site um whether it's carfree walking shade things like that uh the replatting of land and then the public access easements to the open space next slide and then uh as mentioned 100 the as for phase one it'll be the 140 uh for sale town home units uh that are up against the Wilbur neighborhood and then um uh minimum Area Public publicly accessible space uh and then the uh the plan would be commence construction 12 months after the close of sale and then 24 months uh to complete that which we do have some contingencies in there just in case there's unforseen things that hold up there will be uh some extra time added on at the uh uh in the development agreement so they can keep moving so within the development agreement the city has a certain number of obligations as well um you know the first is that we own the land so we'll have to consent to the replatting of the land um there are as as we discussed earlier there's a existing Street system that exist and that street system isn't necessarily going to align with what called thex vision and concept is so we may uh we will um agree to and help abandon portions of rways and in some instances entire rightaway such as Wilbur Road uh now one of the biggest and most important um elements of this uh proposal is the reinvestment of land sale proceeds back into public improvements um for the first phase of the project cesac has requested that 100% so 2.74 million dollars thereabouts depending on what the land area ends up being would be um reinvested in um to the project is reimbursement for public improvements now it is our intent um to the city's intent that that those reinvestments would be for enhanced public improvements and when I say enhanced I think I say things like Street Scapes parks open space things that are publicly accessible um the the the um $ 2.74 million represents about 35 to 40% of what called a sec estimates today to be their future um infrastructure costs now that is a very rough order magnitude because um the level of concept design doesn't allow a whole lot of engineering to be able to to flush that out but it represent somewhere in the neighborhood of of 35 to 40% of what the infrastructure cost that cesac will will experience for future phases we are negotiating um a different proportions and KAC recognizes in the that the city's perspective is that future phases that proportion would be significantly less um today we're talking about U Future phases no more than about 30% of the land purchase value would be able to go back to reimburse for public improvements in future phases so Jeff on on that topic do we typically do that reimburse uh 100% on these public improvements for this type of investment Mr Brady maybe you can share some light or mayor and Council I can say from my perspective this is a this is a unique unique Arrangement that for this project that we haven't had on other projects other projects we have definitely reimbursed or I I should say we have not necessarily reimbursed for public improvements for public infrastructure but we have funded public infrastructure that supports projects I can say the the previous um project that we had worked on for site 17 with Mir Vista that we never got to the stage of being able to present development agreements it was going to include a similar reimbursement model is this a negotiable item sure and I think um I'm just asking the question no no no so it's a great question um no the answer is for a for a total developer we don't usually do 100% but as I understand what is being proposed here is that the first phase is a request for 100% the 2.

74 million so but when we conclude the entire project across the board I think I'm I'm comfortable in that first phase because that's the highest risk it's the opportunity to prove up the concept I think we we appreciate Ryan's effort in working with us on the home ownership so I think there's some opportunity for us as the community to be participating at that level however what I would suggest is in the subsequent phases that it may not necessarily continue at that level and so may over the totality of the um project um it would be be much less than 100% right and I would caution or just I a caution say I don't think all of the infrastructure impacts have been calculated on this project uh specifically electrical so I think there's still some conversations but if that's also going to be on the city right to help support that so I think there's an opportunity to find a way to use the proceeds to help the developer and their initial development but also maybe to offset some of the costs the city would have to extend such as electrical so I think and phase one certainly 100% is not typical um but because this is phase one of three three phases and I think it's the most important phase and the amount isn't frankly that significant I think we'd be comfortable but I think in subsequent phases we expect we wouldn't expect to continue at that level and we'd want to see that step down so that in the once it's all completed it would be much less than 100% mayor council um to give a little context what with the current discussions we're having about the reimbursements in phase two and three is expected that over the entire property that the reimbursement amount would be 50% so 100% in Phase 1 30% in Phase 2 and 30% in phase three would would average out to 50% across the entire property and and you know to provide a little context uh for the incentives in phase one we Chris mentioned it but staff is giving significant consideration to the opportunity to bring for sale product to downtown um I I looked at it last night the the last for sale product that we had developed in downtown besides the very rare single family house that was built on on a lot was the late 8 1980s ropes and Street Villas and and and um actually interestingly enough the Mesa Park Town Homes which are the three-story town homes on the east side of site 17 those were also the late 80s so that was the last time we had a a a an attached for sale product in downtown um I to help to help encourage for sale products is one of the reasons that we're supportive of of the incentives that have been requested uh in addition to that cesac has made a compelling argument that given to the current um financing and construction conditions that um that these incentives are are um well the fact that we don't have um a supply of this type of housing to show that there is a demand is that the market is not responding is not going to um want there is a certain level of risk in the in the financial markets um CAC has made a compelling argument uh to show us the the financial need to be able to deliver the products that we want to see be here too thank you Jeff let uh council member Dev do you have some more yeah um I mean I could take up a lot of time I I'll try to be brief the other um the main the main questions were on on this development agreement you know the deal points um there was reimbursement and non-dedicated portion of construction sales tax in negotiation sure so if I may I'll I'll just run through this last slide and then we'll be ready for questions um so I should have started with this slide because it's much less thing to talk about um as we always do in downtown the city is going to provide essentially coner service for this project essentially help them through the the zoning entitlement process to the extent that we can to make sure that it's smooth uh speedy and smooth um we'll also as we are allowed by State Statute provide off offsets for previous impact fees um the the reality is that that and is likely that there will be no impact fee offsets because our last impact fees Public Safety will retire in 2026 before um kisc will have a a permit to pull um we will also co-sponsor applications for any state and federal grants that could help um with our achieve our shared Mobility goals and then council member Duff to your to your point we are discussing the reimbursement of non-dedicated portion of constru construction sales tax that is something that we are still discussing it is the city's position that that any such incentive would be tied to the the provision of called by cesac of that unique retail that they have at called in Tempe so that the the reimbursement of sales tax the construction of sales tax is helping to support the the the achievement of the unique retail in the project that we're hoping to see by um helping with the cost of the offering offsetting the cost of the lease rates I I mean what does that look like I'm I'm sorry I'm not familiar with these kind of terms again it would be it would be something that where we would be using the construction sales tax uh rebate to again reimburse for costs for public infrastructure or public improvements that would support the the development of the retail component okay I got it is there a timeline on that the the retail component I think we were looking call is looking more towards phase two and phase three for the that element Miss spillsbury goe Miss spillsbury I think she defer to you you have one more okay more than one more thing so we we we have to go through entitlement right we can't do form based code or just we have to go through entitlement process um I think I've asked this before but it's been a long time since we've been to this point mayor council member Duff the site 17 was specifically left out of the the form based code when we when we adopted the form based code it was such a large area of land that to to arbitrarily apply the the form based code transacts to it didn't makes sense because we knew that it would be configured in a way that we wanted to be able to apply the transex specific to the development so it fit the development so we will have to go through an entitlement process no matter what um from a zoning perspective we're we're looking at probably using more of a a pad um model but it will probably have a lot of elements that you would recognize from a form based code and we didn't entitle I guess in the last development no we we we we got down the path ways but we never got to the point of actually bring zoning cases forward okay see okay all right all right um just curious on on the market rate I'm very excited you know more than 40 years or around 40 years you know since we've had um a lot of people inquire as U Ryan is alluding to um are is that market rate um like what do you have is it is that even decided at this time um as far as square footage what target market anything like that think so in the in the first phase it'll be two and three bedroom for sale town homes and then in future phases it'll be Studios up to three bedrooms so we want to have a variety of of price points and sizes for different needs the studios would be for sale as well uh the studios will be in future phases uh likely for rent okay and is that more targeted for the ASU students looking for studios or not necessarily is is that the intent there there's broad demand I mean the National Association of Realtors did a study that every generation would like to would prefer on the majority would prefer to live in a walkable neighborhood and that's what we've seen in terms of who's been at CCT Tempe and obviously m is different but the the demand is pretty broad uh for the ASU portion specifically if you're asking about it we think there's demand from uh from from the ASU students that want to have a place that's a little quieter than downtown Tempe yeah yeah um it's getting into the weeds as far as the layout and how it affects you know the surrounding property but um so the town home's getting back to the for sale asking for a friend um like what are you building in Atlanta would be similar what size are those the square foot what are we going to be in the upper Mark I mean as far as price point do you have any I just wondering if it's going to be a price that is going to be um I have no IDE idea what town homes would go for especially for new construction but I hope it's in a moderate rate that would appeal to everybody yeah the the uh the construction prices are are are still high but in terms of the prices we we think that these will be starting in the threes wow that's less than I thought I was expecting a lot more than that high threes but okay don't don't push it Ryan don't push it it depends on how the market evolves but yeah okay and uh so and I noticed in in this one of the slides said condo for sale as well uh we put condos SL toown homes different different configurations might work for sale one of the challenges with the for sale Market is the construction liability defect uh insurance and so uh when you go tall with for sale it becomes quite a challenge but for sale town homes work hopefully there's a bill at the legislature we'll see if it gets here yeah um yeah that's an issue um so you have a lot of retail space but there's not going to be office other than that live work environment uh the yeah the the live work offers an opportunity for that there's the potential that there could be office in phase three it'll depend upon the market demand as you know during Co demand for office space went down but also there's you know there's Signs of Life in that market yeah okay and last comment I appreciate having the more of a Spanish architecture there um especially it was an escan escco neighborhood it was um you know when you know we uh led the land it was a Mexican or Latino neighborhood and stuff like that I'm going back to that I think as kind of recovering some of that culture and history um I've seen some great projects especially one in Tucson was a Marcato at the Meno Park or something they have bario type things and I don't know but I think it I think it' be a refreshing architecture um that we haven't really don't have in downtown and uh connects to to the history of the land so think you're going to love it that's it all right Miss BS um I have kind of a more general question so since these development Agreements are for phase one will the Das come back for phase two phase three to us and as far as future zoning cases like we're going to see this several more times I'm assuming uh mayor council member SPS very exactly um we will have a development agreement over the entire property but each phase will have to have a separate development agree well essentially amendment to that original development agreement for each subsequent phase so that that you will again have an opportunity to see this multiple times we will we will go through a overall entitlement process for the entire property but it is likely that we will have refinements of of that entitlement for each phase so there will be a zoning entitlement development agreement entitlement for each phase and what do we actually vote on you will be voting on a purchase agreement uh authorizing the city manager to enter into a purchase agreement within that purchase agreement will be the development agreement as an exhibit um so you'd be approving both the purchase agreement and development agreement we wouldn't actually execute the development agreement until the closing of the first phase of the project okay and then so any kind of zoning cases would come separate yes okay and is this um slated to be on their next council meeting or we are we there yet um May we're just going to provide direction we're just providing direction to okay I agree with Ryan I'd like this to start tomorrow so well that's what we need right we need we want to lay this out before we complete all the legal documents okay just to kind of get direction all right I I guess my other question um which obviously is down the road but so are there current talks with ASU and I I know that we've talked a lot over the years about a desire to have some student housing but like are we we're in the middle of talks or we're just hoping we're going to be in talks with them we've been talking with them uh you know it's uncertain if or when it will get done but we're hopeful they're excited about Mesa you know I don't speak for them but um you know we've seen what they've done in downtown Phoenix and it could be really transformative and so they've got all kinds of things to consider for their longrange planning we just want to make it so that uh if it works out we can get something done it can work on the second phase okay because I mean looking at the two maps it looked like I mean a good chunk of phase one was taken out for potential ASU well we also made phase one wider so phase one actually overall is about the same size but because the South the southwest corner is the closest to their campus that's the best spot for them okay I that's exciting to me just I you know I love the downtown Phoenix campus and um just the fill of it and I think that really could fit in super well with this area and just what we're trying to do to this entire area so I'm I'm excited about that yeah and mayor and Council spills I can kind of give you some uh of our of our experience with ASU in this discussion over uh student housing it is in very early stages um ASU is not prepared to bring student housing yet um they would want more of an academic footprint before they can bring student housing but they are the they are beginning to look at their the overall student housing um mix and Mesa isn't they're looking at Mesa playing a role in that um so the conversations with with cdec in line lining up with that has been been a um a good thing for us anyone else Miss go sure uh I'll just make a comment I really don't have any questions um I you know I've always been impressed with culdesac Mission and and vision you build for Community you bu you build for people um you uh you take in to consideration climate and environment I think that's important and and try to sort of ease those environmental pressures heat all all of that local retail is important as well and just activating an an area and and building with community in mind I I think all those things are great they're important I think they'll be successful here we don't have a lot of that um and and even my constituents are asking in fact out in D5 they said can we have a culdesac development out here yeah so I people recognize it's different and and they like it and um I think a lot of our questions are Market driven I you know they're the market will um dictate how some of this rolls out I do I agree with having the ownership uh in this first phase I think that's great uh you know fingers crossed it does well I think it I think it will based on what's important to what you stated as what's important to a community in a development for culdesac um in addition to what we have said as as the city of Mesa that's important I think merging those two it will be successful but anyway so I don't really have any questions I'm I I'm happy and I hope it moves forward as fast as it can thanks Julie thank you for that I appreciate those comments um I forgot I wanted to ask about the parking so it's car light so right now I'm seeing one to one for this first phase so is that that's about what we're thinking or So currently uh we are structuring the development agreement to have a minimum requirement of 800 parking spaces as was in initial concept right with um we are discussing potential for increasing that um but CAC is committing in the first phase that there'll be at least one space per unit okay all right anything else Mr Adams there we go well good morning I uh I just have several not many questions and a couple of comments but I'd like to start off by saying I was pleasantly surprised when I toured uh the Tempe project I wasn't sure what to expect but I did like the look and feel and the vibe there if you will so uh that was a pleasant surprise for me um just just a few just a few questions um there is a slide where you talk about reimbursement of maybe that's the wrong word of the U construction sales tax can you monetize that we talking a million two three four what is that do we know um mayor council mayor Adams unfortunately we can't monetize it until we we know how much construction sales taxes or how much construction will cost but the value of construction but what I can tell you is that that it is would only be that portion of non dedicated um the city's portion of non-dedicated sales tax so the 1.2% of the city sales tax it would about six 60 cents of that is dedicated so it would be about 60 cents of okay you would bring that back you would see that so this is just telling you the concept but the council would actually be we'd have to bring back to you the specific development agreement about how that construction sales tax would be applied to incentivize or to encourage some kind of unique retail or entertainment or experience so you would see that connection in a future agreement but it'll be part of the agreement going forward it could be yes when we could be okay so it's still a deal point I'm just curious I mean surely somebody has some rough idea it's either 10 million 100 million what what I what I can say is that that in comparison to the reimburse or the reimbursement for public improvements using the proceeds of the land sale and also the purchase price that it's a it's a much less significant incentive okay I'll wait for the the facts later um I I've never heard the term concierge zoning service but that sounds in in intriguing however I uh I I would like to know do we anticipate any zoning issues I don't should this go through Planning and Zoning I I L easily I do imagine that you know we will have a robust public involvement process um CAC is you know clear has made clear that they want to be able to get out and start engaging with the public as soon as we have an agreement in place so hopefully that will help with the the public engagement but from a from a a staffing pers City staff perspective we anticipate um having uh I guess a very smooth uh zoning process and entitlement process because our vision um City's vision and call the sax of vision is the line so it's more about how do we make that uh how do we entitle that with zoning okay so we're just being proactive here that's good um so we have about an 8% difference in appraisals I'm assuming that independent appraisals were used by both parties yes and my only comment there is I understand you're going to you hire three appraisers you're going to get three numbers my my only comment there is I hope the city would not be the one that takes the greater part of the disadvantage in the negotiation I can live with 50/50 but that just a comment for you um okay and we're we're talking car light so and that's fine but what do we do how do we control so we have one to one how do we control the streets from piling up with cars when people don't follow that rule is that going to be a ccnr Ryan have you thought about that how how are you going to keep people from parking too many cars in there you want to is that one well I question I think I think both of us have an answer for this one okay um mayor uh Council M Adams there's there's a couple U mechanism um this Falls within our downtown it falls in the area that that the downtown MCE Association is responsible for managing our parking um we don't have any parking uh restrictions in this area now because we don't have any parking demand um it is very much uh very reasonable and we've been talking with kisac that that is very reasonable that we would be able to expand dma's role for parking enforcement and extend it over into the kisac area we can we can uh apply um time limitations for on street parking we can provide um we can um Institute other mechanisms to be able to to mod um to be able to enforce parking requirements um particularly for the neighborhoods of surrounding and uh um folks from Transportation should plug their ears now because they don't want to hear this but if it ever becomes an issue there are things such as neighborhood parking programs where you can Mr Brady shaking his head too I stop talking um we don't want to go there but if it ever gets that bad you can and it's what Tempe does around their campus to to keep students out of the parking into the neighborhoods and just create a program where it's specific to that neighborhood Okay the reason I ask is is there is a neighborhood in district one that's dealing with a lot of on street parking where people shouldn't Park and I'm just think okay if you're thinking about it and planning for it I think that's good um last question I had was um Ryan you mentioned um renewal rates at at 10p in the 80% range I think how does that compare to Market is that high low is that good our renewal rates are are better than than Market but they're not substantially different typical Market renal rates are something like 50% okay okay all right okay thank you mayor that's all I have anyone else a question and same like um Council M Adams very impressed on the 10p call theack and really uh the vi the vibe there is really interesting and just a mix of the retail and how it works with the the people that live there I think it it's it's a neat concept um I know uh there is various different Outreach meetings and stakeholder meetings and maybe council member Duff you chime in to like the uh neighborhoods and stakeholders around there I know we've had various different iterations of Outreach based on the different ideas that have come on over the last several years but any any particular insights with this plan or conversations that uh maybe Jeff and council member Duff have you've heard um just I'll ask that um mayor council member Heria uh surprisingly uh or not surprisingly I should say time has passed very fast since we we did our last Outreach effort the transform 17 Outreach it is from that transform 17 Outreach and the significant amount of public input that we that we had that we created The Guiding principles that established that we used to establish the RFP that call the saac um um responded to and we selected from now that again that goes back to October of 2023 we have not had any additional public Outreach or significant public Outreach since that point um we are looking forward to um moving forward with kisc so that they can again you know initiate their public Outreach efforts sure um I'll just go back since I've been following this piece of property from before I was on Council and which we started a public Outreach in order to find out what kind of development the um Community would support and its height restrictions what kind of elements and stuff like that and the basis you know just the shell of that has been used in order to solicit and for this RFP in which culdesac was selected um uh many people know because of the Articles and and discussion in around the area that culdesac is the proposed development and it's been very positive the only thing is like why is it so slow um so I haven't had any push back I think it is really a strong project and I think that's why we selected culdesac for that part of our downtown to really activate it as a catalyst and being connected into downtown so it has that Vibe we need that vibe to be part of the whole entirety instead of just another apartment complex and because it has a very Community forward um programming and and the way it's designed and developed and being able to have downtown connecting that is really going to be a catalyst for other development I think around it so I I think it's a very strong development to uh being a major piece of downtown and what we want downtown to be and what people I believe is that Vibe the reason they come downtown and I guess downtown is getting a Vibe I heard this from my hairdresser yesterday because a couple years ago well I don't know I I work here I don't really hang out here and then he's telling yesterday he's like it has a Vibe oh my gosh on Saturday night we just want you know and but you got to keep it local you got to keep it real you got to keep it authentic don't be you know and so um I'm glad it's getting a A vibe but this and culdesac really is a great partner in continuing the element that many people are following in love with right now and really and providing some housing options because that's the other complaint I get all the time especially on for sale units and students wanting to be here and and ASU professors and such um and um uh empty nesters we know quite a few who are looking for spaces in order that we want to be part of a community and get rid of um uh the large single family environment in which they live wan to downsize so um I think it's really stepping into the future of a lot of multimodal type environment that we need to develop for for downtown um so we remain connected and um people forward um so I don't have any concerns as far I'm not feeling any pressure from anyone in the community there was some pressure in the last one about um affordable housing being Inc involved but I think this development because of the way it's designed keeps it affordable without it being affordable because because we're not dedicating so much space to cars and have to have this free housing for cars um priced into the units and being able to live car light or without a car certainly um makes it more affordable way to live that's why we need to lean harder into multimodal options um for everybody to reach it and to to live and work so that was a long answer than yeah vice mayor anything you good yeah good okay so you know I'm been around a long time and I feel like we're putting jumper cables on a project and get it restarted again so uh I look forward to moving forward with this and especially the neighborhood Outreach and get their input one thing I I think putting guard rails on these projects to help make sure there's continuity protecting the city's assets before we sell them and make sure all the timelines are followed through I think that's extremely important I I'm looking at you know I know staff has taken us on some tours and I appreciate that but I think that it's important that we have quality developments that are long lasting effects in our community because you are U right next door to a historic district and I think the continuity in that and how that blends into the new development so whatever the design phases phase one and two and three blend out hopefully there's continuity in that so it stands out as a unique area in Mesa with that I I still have a concern about parking because people are still driving the community I know we differ on counsil on that but I don't see anything uh any people not driving I see a lot of two vehicles and things so I think that keep that in consideration Ryan as you move forward with your project but uh I don't want overflowing their streets and having to manage that I think that's not respectful but with that I think it's just Direction I'm hearing from Council that we're going to give you direction to move forward Council good with that all right thank you any last comments mayor with with council's direction we anticipate being able to finalize our negotiations on the purchase of development agreement and have it back to you this spring uh with that meaning me ah I don't think you have a meeting tomorrow but um spring ends early in Mesa you know by April is considered it feels like spring already we are we are very close we really needed to have this this discussion to make sure that we were going down the path the council was supportive of um but we would we anticipate that Colac will sign that purchase agreement as soon as Council approves it and that we'll get kicked off into the zoning entitlements right away all right thank you thank you good forward thanks for your time okay item 1B is here a presentation on General excuse me governmental and Utility Fund forecasts thank you Brian and your team coming forward did we lose anybody just Scott all right now we'll transition from development to uh money I guess forecast good morning mayor council my name is Brian Rell I'm the Office of Management and budget director along with me is Chris Obi he's the Office of Management and budget deputy director so this um will be going over the financial forecast of the um major funds that we forecast which is the general governmental fund and the Utility Fund and kind of going over the principles and the Outlook of that fund that we're seeing throughout the uh next five years so with this what we do typically is periodically and I know Council kind of looks at this too is the homeowner comparison and we take that into consideration when we're looking at the forast looking at the budget looking at utility rates things like that so what I want to do is go through and see first slide is what's included in that homeowner comparison and what we take a look at is what is a typical resident what are they paying for to uh for full service to live in the city of Mesa so one of the things that we look at is primary property tax and secondary property tax uh the city of Mesa along with the one other municipality does not have a primary so we have the secondary property tax we also take a look at City sales tax and what we do is we take the there's a basket of goods that we that we take from economic um software and we apply the city sales tax and what a typical resident would be paying for those goods we also take a a look at the three major utilities that uh most municipalities serve which is solid waste water and waste water and what we do is we take those and combine them into a chart which we have is the homeowner comparison and so this homeowner comparison focuses on fiscal year 2425 the annual cost comparison and included in here as you'll see a few little things what we do is we combine all of those one of the things that we have included is you'll see a little asteris next to Phoenix Phoenix is looking uh they will be deciding in a couple of weeks on looking to excuse me raise their sales tax by half a percent so 50% so that is actually what is included we have an asteris because it's just estimated so if they did do that this is where the City of Phoenix would fall the City of Tempe has also uh put out their notice of intent for uh for their utility rates so we've included that because once they do the notice of intent then they're looking to um as you're where the utilities will soon be adopted and they can't go lower they can unless they want to redo their notice of intent so we've included those rate adjustments also in there as you'll see at the top is the town of Gilbert the town of Gilbert now has they have approved a half cent sales tax which went to effect January 1 so they are now equal to the city of Mesa at 2% for the city or 8.3 total they have also just approved a 95% increase for for their waste water so their waste water went from about $32 a month to $62 a month so that is included in here the town of Gilbert used to be where we used where we are now currently as you see we have dropped to the third most affordable comparison in this in this chart so with all of those adjustments this does include the rate adjustments that the council just approved in November and so with that we are have dropped a little bit below because a lot of the other uh municipalities are now trying to catch up and where we have been at where we with the utility rates we kind of do the smoothing some of them are doing 14 15 50% now T of Gilbert 95% so this is just want to give you a gauge of what we look at when we're looking at the forecast and wanting to compare living in the city of Mesa compared to living in another uh town or city within the valley so mayor and Council um you've heard me use this we use this quite often often in our conversations I know when we had a quite a robust conversation with similar commity members uh we kept pointing this out and we will always use this as our Benchmark um there is no other better way to calculate how much it cost local what local government cost is than really this comparison and here's what's remarkable that's $ 202200 for a Mesa resident to receive all that that's the part they pay to the city now what's not included in this for all the cities is the urban shared revenues the vehicle license tax and what else I'm missing Chris State shared sales tax yeah so the state so all of that but that's a portion out by population right so it's it's not going to change that's just per capita right the state makes that allocation based on the census so it's equal for all cities based on their population so we don't include that but even if you did that number we think is another maybe $2,000 on top of what um individuals are paying us Chris do you have that number $1,300 $1,300 okay so here's my point 13 $2,200 plus the $1,300 for less than $4,000 a year you get 24hour Public Safety Services who will respond within minutes you get high quality water Wastewater Services twice a week garbage pickup and the list goes on and on and on there's very few things and considering all the inflation and all the things that are taking place that for that much money you can receive all those services that make an impact in your life so uh whether it's Mesa at the third lowest or any of these other cities I think it's just a remarkable uh benefit and yet there many people who believe it's just it's extraordinarily burdensome but I think when you consider the services that are being rendered and what people receive it's this is a rem comparing to what you pay for your mortgage what you pay for your car what you pay for food this is still very reasonable I think um cost for a quality of life so again we we've we've said this over and over again um you know we believe Mesa is a true good value for our residents for the aage this is the average homeowner right they're someone could own a home that has you as much it could be twice as much obviously they're you're going to hear from constituents say well I pay a lot more than that that's they could based on their secondary property tax um but this is the average right we try to Fe fit so it's the same for all cities right and we get it for some it could be quite a bit more some for a little bit less but we try to hit that average so it's going to hit the majority of our residents and it's the what it's a benchmark right it's just a it's a number but it's also a comparison of how we're doing versus other cities and frankly there really isn't a huge difference between um us or Scott Stell and the even Gilbert I mean yes there's a number there $500 whatever it is but it's that's not significant right when you consider all of the costs that are going in city so I just want to make a point um as individuals come and make remarks about the cost of services in the city of Mesa in comparison to other cities this is The Benchmark we will always use we're not going to do a division of per capita of other things because this is this kind of normalizes the comparison and this is what individual residents are actually paying right it's not taking a budget number that includes things like Regional water wastewater treatment plants and Regional public safety facilities that sometimes we carry that other cities don't but we eventually get reimbursed for it this is really trying to take it down to the literally to the nuts and bolts of what people actually receive um in their local community with these and that's why we wanted to give you explanation of what's included in there so um I think this shows that mace is trying to be very responsible with the dollars that we have and trying to provide a very good value uh for those Services thank you Chris Mr Adams thanks Chris that's that's great information I'm just curious so is this chart based on the the total number of customers receiving water Wastewater and so forth divided by the total expenditure how do how do we arrive at this average go ahead Chris you you explain um mayor and council member Adams for for water and wastewater uh we follow our rate schedule so we look at the median usage for customers uh by month so typically it's 6,000 uh gallons per month so we take that 6,000 gallons against our rate schedule and that determines um the amounts in here Wastewater charges are based off of U the winter water average so we we look at the homeowners you know median usage and then apply that so what they're actually paying the average homeowner is actually paying we do not take a division of per capita because is there are Wastewater and water treatment plants that the city that is on the city of mesa's books but are shared Regional facilities that we're getting reimbursed by those other communities but if you just took the expenditure line and divided that by Mesa is probably going to be higher but what they're not seeing is that it's a regional facility it's uh the Greenfield uh wastewater treatment plant and yet what they don't see is the revenues coming to re imur us for that so that's not a the best way to calculate it what what this is is the actual cost for an average resident and their local community so it kind of takes all those other um variables out and just says how much are we charging for all of these services and then we try to create a average that we can then apply across all the other cities okay I I don't doubt for a moment the the accuracy of the chart I just the the questions will always come on something like this well is it Apples to Apples so for absolutely my my question is based I just want to understand the source information so thank you appreciate it no no it's a great question because you will still hear residents and they'll show up to the council well city of Mesa per capita is so much more than Gilbert yeah but that's not that's a that's an oversimplification of an approach that doesn't understand that there are lots of projects especially in Mesa because we're the largest city in the East Valley that we provide services and Facilities that other cities utilize but they also pay us back but if you're only doing an expenditure calculation per capita you're not going to see that so what we said is no what does the actual homeowner pay if I lived in Mesa or Gilbert trying to draw that same basket of goods if you want or Services sorry services and do that comparison cuz ultimately that's what we're all paying that's what the average homeowner is paying to live in those communities not what the gross budget is divided by population I just want go ahead so the average of Mesa and then used in each City not their average User it's our average user and then calculated based on their costs that's correct mayor council member go forth um we look at the Mesa median of 6 kgal uh or 6,000 gallons and we apply that to every other city in this comparison as if you know if I use 6,000 gallons in Gilbert Tucson Glendale it's the same so our median is 6,000 yes yeah I don't know that we've ever it's interesting question I don't know if we've ever looked and said well do they use more in Scottsdale because they have bigger yards or so we just tried to normalize it said for Mesa if you were a person in Mesa and you live in these other communities and using the same amount of water or Wastewater what services and because after that everything you know it's hard to like well is it different police services or fire services and yeah you know so we just try to normalize it as best we could to get that Apples to Apples comparison yeah I just want to go back I I was just wondering if their if their homeowner comparisons would look the same then well the only thing that may be different is they may use a um their 6,000 Allen could be more or less than that I don't know what that looks like you know you think about if you have bigger Lots with more outdoor usage then maybe it's up and we're such a big what's that more families there's communities more families have more people but again on a per per gallon basis we're just trying to normally and say okay in Mesa here's what the aage average homeowner now eventually you apply that to their rate right so we take our 6,000 gallons usage and just said if you lived in another Community assuming you're going to kind of have the same family side you know that that doesn't change and your usage would be about the same how much would you be paying in these other communties we're just trying to figure out a way to normalize it as best as possible say if you're a Mesa resident but you were living these other communities for the same amount of consumption of services what would that look like so that's what this is and and it is fair too because we use the secondary property tax right and we have to look at that across other values across other cities but that's how we yeah mayor and council member spillsbury another thing to take a look at too is when we do that is in say with the city sales tax city of Mesa does not have a food tax but other municipalities do so that goes into our calculation also is that okay if you're living in Mesa your sales tax what you pay may be less because we don't have a food tax where in Gilbert or Tempe or Chandler where they do have a s food tax you'd be paying a little bit more cuz you'd probably be shopping in those area so it's the same with that and same with primary property tax the town of gilbertt and we don't have a primary property tax but others do so they would be paying that so that's kind of how we would say okay if you if we picked up this household and put it into Gilbert Chandler Tucson this is what they would be paying at those rates okay I just wanted to add you brought up City sales tax and the other municipalities have raised their City sales tax by Council decision but in Mesa we cannot do that we have to have it voter approved so I want to differ there is a difference between us and them about just raising taxes to meet your obligations on your budget Brian go ahead I'm sorry can I asked one more question so on that so but you're talking about the total tax so um even if they have a even if they have a food tax it doesn't their their total sales tax may be lower than mesa's you're you're not their rate their rate yeah you're not necess basket of looking at the you mentioned the food but that's not added on top of I mean that's calculated within the rate and it doesn't necessarily mean it's calculated on the how much they would pay in a year for their sales tax First tailes Tax yeah right because we look at a I'm going basket of goods and that we do where do we pull that from um mayor council member go forth okay the for the sales tax we look at the Bureau of Labor Statistics uh consumer expenditure survey and so the the BLS will survey a number of homes in the Phoenix MSA and they'll determine how much uh a household spends on you know food and gas and other items and so we apply that to all cities with the uh sales tax rates so a good example of this is Gilbert has now the same 2% sales tax rate as us but tax uh groceries and so if you look at the Gilbert the dark green bar um you can see that their bar is a little bit bigger than our dark green bar because the consumer expenditure survey says okay you know a household spends this much on groceries in Gilbert that's going to be taxed in Mesa it's not okay thank you um this is this is no doubt a daunting task to to try to estimate all these things or come up with some baseline what would be really helpful for me in addition to this is if we had a chart that showed by the same comparison of municipalities what the rate per thousand gallons for Water waste water if if that's available um in the same form of comparison uh yeah um mayor council member Adam so um we we have we include that um in the rates for each of the Cities so depending on the rate structure for each City it it depending on where that 6,000 gallons Falls maybe that's tier one maybe that's tier two for various cities each city has a different um water rate structure so you know some say tier one is between zero and you know 10,000 gallons or more or less and so we look at each of those rate structures for each City okay we take that Baseline usage of 6,000 gallons per per customer and apply that to each City's R we're doing what you're asking but we pick a specific number that's related to our average because it keep like Chris is saying you may have another city that the higher tier kicks in maybe lower than ours or higher than ours I see and so that so that's why we had to pick a number that we said is the average of Mesa and then we just apply that against every other rate again it's it's just imagining of taking a Mesa average Mesa homeowner and plopping them in these other communities and they're consuming the same amount of water and everything and then how much would that cost that's that's the best we could get to I I was afraid you're going to tell me that each city was different and apparently they are oh yes yes quite a bit Yeah and a lot of that to our benefit is a lot of these cities are having to pay a very strong premium on their water supply yes and now they're having to um really be a very aggressive in building that out Mesa historically even though we're spending some our biggest projects on that our water portfolio and the investment that Mesa has made over decades really helps us manage those cost down quite a bit okay thank you I appreciate the detail Miss SPS just as a followup to Rich's point so that's why you can't just stick like a number or a rate or a percentage on those those colors because because it's much more complicated than a number that matches for every city yes mayor council member SPS very correct it's cuz each municipality has different rates for different gallons used and even with Wastewater their rates are different with with that to where we have our Wastewater average then we apply it as a as a flat amount some of them do usage some of them do the same so that's what we we do is um the OM staff does a great job of they'll take the 6,000 the average of what a resident uses but then they'll go to each rate book for each um city and town and then apply that and then put it into the spreadsheet so we can calculate it someone had reached out to me you know like asking well what's the Mesa versus Gilbert and and I was researching both of the websites to see like what a general person would go on and see and there was nothing even comparable that was like oh this is obviously the same in Mesa and Gilbert like it was extremely complicated to try to figure out like what's the rting increase compared to this rate increase because it's just they do it so differently so well we could share with you because we have this in our back UPS say for the average homeowner in Mesa I mean you can see it here but we could show you a water comparison like okay for 6,000 gallons in Mesa you pay this much and here's how much you pay in the other communities for Wastewater and we have to pick a number right we have to pick the number and then we use that number as Brian says then we take the 6 000 and we go okay if I'm in Gilbert I'm using 6,000 here's how much it would cost me if I'm or Tucson or temp whatever that's how we have to pick a number and so we picked the average of a Mesa resident and mayor and Council this is one spread sheet of our homeowner comparison as I think you guys are aware of we have it online and it's called the homeowner uh the valley comparison Valley City comparison and in the back of that is a kind of spreadsheet sheet form of each municipality and what it would cost the number of if you use 6,000 for water it's this much so it's not in a graphical form it's in the number so it's part of that packet that's on so it is online and accessible yeah I think that's important we have a lot of smart people here in the city of Mak and they're going to ask about the methodology and how we can't we can't just showing them this is not enough but online you can find that you can get that the whole packet is online thank you and it's fairly easy to find yes say it again what what would be it's under the it's under um if you go on the website and up on the left hand corner there's the drop- down box if you go under the government and Office of Management and budget and if you scroll down a little bit it'll have Valley City comparison and homeowner Valley City and homeowner comparison you click on that and then it'll pop up the whole thing okay so not underwater necess yeah no this is this is under the office management office of okay per Mr Heria I think just real quick comment to Chris's point I think in my 7 plus years in on Council I think we've always strived to be in the middle or bottom range of this graph like the homeowner compar and then that's that's significant right like our our strategies when we do uh increases because of the cost increasing over time uh we always strive to be in the middle bottom ranges of of this comparison that highlights what we're looking at for homeowners right and I think that's an important aspect uh and you mentioned you know recently gobert had a 95% increase in their Wastewater you mentioned I don't think in my seven plus years we even gotten anywhere close or even to an increase like that right and so that that's an important aspect to because PE uh folks try to U compare us to like Gilbert or or you know other municipalities nearby but the context when you look at some of this um some of this data and then how we try to lessen the impact as as best as we can given all the the price increases we're facing uh is is a is a job that I think is an important aspect to what how we smooth out this the principles that we have smoothing out throughout the years not having a 95% increase like Gilbert has you know uh instituted so that's something that I think hits the pocketbooks like immediately right it gets a shock um and what we try to do is even out uh so it doesn't have that type of shock uh uh piece and that's always been a I think an important aspect to uh and sometimes gets lost in in in the the shule of people trying to pinpoint you know data and saying that uh Mesa uh is costs more uh but when you look at the context in this and the work that we've done over time is not to have that shock as we encounter these difficulties on on price increase so just that comment there yeah thank you council member mayor and council member Heria um I spoke with the officials at Gilbert and the reason they had to do they kind of were backed up they had to make this decision and one of the reasons was given is because they didn't do any rate increases for the prior several years right and so they had to make it all up in one year and it was painful but that's they kind of had put themselves no Cho no choice as you said our philosophy has not been that now it does make it a little bit more of a annual Challenge and difficult conversation I know for the council and the community because we're always every year talking about a small increment but we think that's a better choice than hitting with a $30 increase in one year and just real quickly I just typed in Google Mesa Valley City Mesa Valley City comparison it takes you right to the site perfect thank you vice mayor real briefly we had a resident come up and make a comment um last meeting about this comparison and Community facilities districts there's two I believe in the city and how those roll in I also know that at least Scottdale has one probably a couple others that's not included in this right and mayor council we are not going to include those because we don't include HOA fees and me and you choose you know what we always remind people is you chose to go into that Community you signed the documents you did that didn't you I did that too I'm just so we've made it very clear that not I mean while the council sits as the what cfd board governing body governing body you they make those decisions I mean a lot of us live in other HOAs we don't pay that much but we pay an amount and but we don't have any way of figuring that out so basically we are not including that this is basically the cfds like HOAs and some other things is each Community is going to be different within that City and that makes it impossible to add to that so you have to add that well I know one of those cfts we're no longer selling bonds for we've closed that out and we have just one more to maybe consider shutting down thank you well great uh I think this comparison works really well for a snapshot of what we're doing in the city and I look forward to further Financial forecasting coming up so yes mayor yes mayor and city council uh no we're not done um yes mayor number four as council member Heredia mentioned um we do look at this comparison and we try to stay within the middle to the bottom third of that but also to be able to provide the services the high level of services that we are able to provide and still be able to be down there on the next slide Chris will start going over kind of with the financial forecast that we use to be able to do that yes so I'll walk through the next couple slides the Financial forecasting process uh so first we'll start looking at the current expenses and revenues uh that we're receiving uh and paying and then we'll look at historical Trends as well to see how those have been tracking in recent years uh any forecast we we look at multiple years we provide multi-year forecast to council uh which allows for an evaluation of of the financial sustainability of uh of various programs and services um we include future needs so what we call life cycle items which would be purchases that we make not every year but maybe once every 3 to 5 years we make sure that we include those in the forecast as well as operations and maintenance related to capital projects we'll look at the schedule for various projects and see when the the operations of Maintenance needs to come online include that and then last year is the city's Financial policy call for the use of ongoing revenues for ongoing expenditures so we don't want an ongoing program being funded by just a one-time Revenue digging more into the revenue side um in within om we have a St statistical software um program where we evaluate the correlation between economic Trends and the city's Revenue sources uh where we can we collaborate with departments on uh Revenue forecasts so good example of this is the utility revenues we work very closely with the Departments as they understand the rate structures uh relevant economic indicators that we look at population and account growth wages unemployment other macroeconomic data um and we also include Mesa specific factors so if there's uh some economic development activity um if there's a large utility customer that's that's coming online or if there's legislative changes that affect Mesa specifically we will also include those uh in the forecast if if we know of them on the expenditure side we look by expenditure category so first is going to be the personal services and what we do is we go through each line item of the personal services so pension rates medical premiums salaries and we'll forecast each of those individually and then roll those up into the the personal services forecast as a whole for other services and commodities we have large specialty contracts that we handle separately um for General expenditures we forecast those at the Consumer Price Index or the CPI for those large specialty contracts some examples here uh we have a lot of these in the utilities so uh water commodity purchases chem at the treatment plants Solid Waste tipping fees each of these are large um contract items within the utilities and we collaborate with the Departments to forecast those appropriately and then last on here is capital so the majority of expenditures are related to construction projects or vehicle purchases um we do have a multi-year plan our uh CIP process is concurrent with the budget process and any Debt Service payments related to any capital projects we also include in our forecasts so I'll turn it back to Brian to go into the general governmental funds so just to highlight quickly um you most of you have seen this before here's our general governmental fund financial principles we have the five principles of balancing the net sources and uses throughout the forecast also a 10 to 15% Reserve over the 5-year forecast period but also sustainability of programs and services and then uh keeping wages and benefits uh comparative to other municip alties around the valley and then also investment in capital assets and life cycle so those are the five principles that we like to follow when we're doing the forecast so what I want to do is transition over to kind of the current Outlook that we're that we're seeing uh for Revenue pressures of the current Outlook we're with most of you know we lost the the residential rental sales tax which is roughly for this General governmental fund is just over $18 million annually and then kind of grows um throughout the forecast they also implemented the state flat tax um which um with that will lose some revenue on the calculation that they did and then also we're seeing slight to no growth in our city sales and state sales tax so those are kind of the the revenue pressures that we're seeing on the forecast with that with those revenue losses we're also seeing significant um expenditure pressures and what I'd like to do is uh ask assistant city manager or soon to be city manager Scott Butler to come up and kind of talk about one of the bigger ones which is the compensation and benefits the city just went through a uh compensation and benefit um Benchmark and you talk about the kind of the public safety side of it great thank you Brian mayor council good morning it's uh it's a good news bad news situation the um the good news is we um completed our our benchmarking survey that um we were committed to this year with uh for Public Safety and uh the good news is that it's been a priority of this Council and and of City management to make sure that our Public Safety officials both in police and fire um I should say Personnel in police and fire are compensated um adequately and fairly along with our regional peers that's so important for uh Recruitment and for retention and to make sure you know certainly that we are recognizing the important role of Public Safety in our community and that we're paying our um our our employees adequately so as we've completed that um it it showed that we were uh in just a two-year span um sizeably under Market uh from where some of our peer cities have gone so um because of that we'll be making adjustments that um Mr Brady and and Brian have put into um our budget um as as we go through this but it does carry a substantial Financial input impact uh to the city so in order to bring us up to speed and and and relative to the market of our of our peers the impact for both the adjustments to police and fire sworn personnel that are subject to our mou agreement that we have is about $23 million um so that will be an ongoing cost that um Brian and and Chris have to add into our budget so that's a compounding cost over over time and that's just to bring us to Market and is just for our sworn personnel uh that u in in police and fire so you you can see uh unfortunately we we all hear about it and and maybe read about in the community uh and our neighboring communities just the aggressive nature that departments have shown to try to uh use compensation as a tool to uh to to recruit and retain their employees is certainly turned um we refer to and I think it's fair to say it's an arms race right right now on um on Public Safety salaries and frankly I don't know how it's sustainable over the long term for any of these communities but um we know the importance and we agree with the importance that we we have to be um adequately compensated in the market so we have to make uh those adjustments in order to do that knowing the importance of Public Safety in our community so it's uh so that was certainly the bad news is that uh that Financial impact is going to have a a dramatic um impact on our on our ability to um deliver services in in other ways uh when this is taking up such a huge U portion of our budget so Scott how often under theou are we required to Benchmark we um per theou we agreed that after two years uh and we're ending up year two of theou that will uh year two ends on June 30th and year three starts uh July 1 that we would do a benchmarking this spring and then those um benchmarking rates would go into effect on July 1 and it's just a benchmark of salary only only salary it it it is a salary um that that is correct and and mayor and council member go forth absolutely there are I mean we all know the question as to why I mean why you know why offer lifetime benefit right if it doesn't if it doesn't count towards somebody's overall benit benefit right and and package right so I I mean 23 million maybe we pull back on some of those other benefits to to to compensate for that additional 23 million I have we discussed any of that well mayor council member go forth I I will say the 23 million and and staying competitive in wages is just to keep us on par with the market what some of these other benefits at least what I hear as I'm talking to officers and and others out in the field is that's what separates us to make us an employer of choice if if everyone is being paid roughly the same what are those things that separate the city of Mesa especially we we are a large complex organization right our our men and women both in police and fire um have more complex um assignments sometimes than what they could potentially see in a neighboring community that maybe has less calls for service or um doesn't have the same medical needs that maybe we see throughout a city of our size and our and our scale and so there's uh I think that's why we offer the added benefit right maybe to compensate for those types of things right absolutely mayor and Council and and again this is obviously a policy decision but just um what I hear is the fact of yeah you could go to a different department and it you you you may not have to work quite as as hard because it's uh less calls for service or a little quieter in in certain regards but um in in Mesa folks who want to be here they they understand that comes along with the assignment and That that comes along with the nature of our of our city and so we look in addition to salary which we want to be competitive right we we don't say we never go in saying we're going to be the top paid uh organization so does this assume this doesn't even assume being the top paid this we we will not be the top paid I don't believe in any of the categories we're in top we're in the top three we're right there so and coun go for those are great questions let me just add this is just for the benchmarking then on top of that there's another 5% for the setep pay so um you are absolutely right and you're going to see it here in a minute we just want to lay this groundw because we're not backing off of this part of it but as I told the police department last night in a presentation I made to their staff is something has to give now if we can be compet we're going to be competitive on pay and benefits but something has to give and you can't make up this amount of money when all the other departments are also cutting back you can't just say well don't touch Public Safety what that means is you are having to make choices to drastically reduce the services outside of Public Safety what we believe is and the challenge we've presented to both police and fire is you have got to help us find the saving somewhere else whether that's overtime whether that's specialty assignments um we need to keep the core services but there may be things that we would like to do but we just can't afford to do in services and it's not that we don't want to it's not and Public Safety will still be by far the greatest priority in the city it's just that the unit cost to provide that service just keeps escalating you know I mean how many as much as inflation has gone up to get a 10 to 177% pay raise in two years I mean it just shows you what this Market is it's just it's just kind of out of control frankly but we have to play in that game unfortunately but it is not sustainable because you heard Brian say our revenues are not growing but maybe if we get 3% this year we're going to be excited and so it's a math problem right expenses salaries benefits are the greatest expense the biggest portion of our budget if that's going up by let's just use the word 10% it's going up more than that and revenues are only at 3% it becomes a math problem the good news is I'm going to jump ahead because we're all kind of there we're starting off in a good place financially we to let for a period of time right when I started this conversation all months ago I was thinking oh we can absorb slow down the economy and the sales tax Elimination we'll we'll need to make some cuts and we're doing that right now we can absorb that because we have three to four years five years to make that happen this number pushes us up against two years right so we've the good news we start from a point you know we we're just at a modest financial position this would be much more urgent now we're going back to Public Safety and saying you got to help us make up this difference in addition to the cuts you have yeah I mean every as you say we have to be competitive public safety's number one service we Pro provide for sure but I'm glad to hear that they will be a part of the process to absorb some of that um thanks okay Mr Butler are you done I am thank you news you don't want to hear more about it oh by the way congratulations on your appointment yeah so mayor and Council yeah so to get back to that it's uh it is a a significant expense pressure because as the city manager Brady indicated some um some sworn or may be getting up to a 177% salary increase in July because they'll get that Benchmark they'll move up but then they're also if they're eligible for the 5% on top of that in July so you could have a significant pay increase for some of those also what we're doing the city is going through is a um Benchmark for the rest of the city for all the uh non-sworn Brian let me ask you a question then on the benchmarking 23 mil per year does that include the 5% for sworn step pay increase it does not so yeah no it does not what is that number then five that's the 5% down no I get that but I it cost much like in millions or hundreds of thousands it's a um I think it's about 1.5 million okay but we're calculating cuz some as some are topped out they get that so I think it's around I could be um misquote but I think it's around 50% is topped out to 50% isn't so it's around there so it's about I think $ 1.5 to2 million so just real quickly I just have to make this because you're going to hear from your non-sworn personnel they're going through benchmarking also right we're doing Market we do it for them also because we have to keep and retain mechanics I was with mechanics last night talking with them about how critical they are um so we have to be competitive in that area so when we do the benchmarking for them it adjusts the range it tells us where we're going to the bottom of the range is where they start and where the top of the range is but despite the fact that range may move up 5% 6% in any one time period in two years the most that they will get is what is set aside in the step pay right unless they're below the range I guess but anybody else will only get either that three to 4% in public safety they get the Benchmark increase plus the step pay no other employees I reminded Public Safety this no other employees get those kind of rate increases the most they'll get is what is available for the step pay even if they're um Range their pay um Benchmark goes up by six or seven 8% they'll be capped at that 3 to 4% whatever we decide so Public Safety gets a very generous portion of consideration and this market analysis it's not just the fact that their rang went up they get that increase plus the step pay okay can I ask Sor I forgot to ask you Mr Butler who who are the peer cities for The Benchmark mayor and council member go forth we this is our peer cities are established by HR and we keep that consistently through both our sworn and our civilian rank so we Benchmark against Chandler glendell Phoenix Scottdale and Tempe how do you choose those I yeah the size of cities oh literally population population it's the best yeah it's just kind of and and I think all the the employee groups have agreed to it I mean it's because theoretically although this very rarely ever happens that someone moves from one Department to another they may come from another state because it's all well they're competitive we're going to lose people where you lose people is at the recruitment stage rarely do you lose you might use you lose a few later on but the theory is that's the market where someone's saying Hey I want to because phoen is paying more I'm going to go from here to Phoenix or I could go to Tempe because it's kind of in this area and it's a and it's departments that are of the size and sophistication similarly it's hard right because you know even for Phoenix right they're in a million and half or million six whatever eight whatever they are and even to say well compare to Mesa you know which were a third of their size but then you go down to tempies and Glendale so it's but it's just the best comparison for this area in the metropolitan area that everybody can considers kind of the competitive market okay because they're the ones they run into at an event so yeah how much you getting PA it's and it's within a market the cost of living is the same if you go to Seattle that would be an unfair comp right right that's and mayor vice mayor that's exactly why Tucson for example isn't include it's it's just a different market and and so even though they're very similar in size and they're in Arizona that it's just a different market so we don't B Benchmark different yeah thank you Mr Adams do you have a question Ju Just a just a couple of comments uh to make before I forget them um you know there's a there's a cost to replace a tenur employee when they leave and I think we're all aware of that but uh I'm I'm well aware of it in my business and Mr Brady just said we're not losing a lot of tenured folks it's at the recruitment stage so that's good to know um but there is a cost in replacing a qualified employee whether they're sworn or whether they're uh in the water department or whatever so there's and that's an argument I make towards making sure that uh whether it's my business or the city that we're competitive in the marketplace um the other comment I have is um I'm assuming and this is not a comment directed at Public Safety it's a comment directed at the overall Workforce I'm assuming everybody on the payroll is essential if they're not if they're not there's a place that we can save some money so just a comment so yeah and mayor and Council to get back to the mayor's question yes the 23 million includes the 5% uh step pay for this coming up fiscal year and it is about $5 million on an ongoing in the in the next fiscal years for that 5% okay great thank you carry on so the other the other expense last bullet point that I wanted to kind of point out too is kind of the city manager Brady just alluded to it is the Public Safety overtime we're we're working with PD on the the overtime we have been for the last year they've doing a great job of reviewing that but that is a big expense too that that we are taking a look at that's an expense pressure other expense pressures I won't spend too much time on is contracted labor kind of like the Landscaping custodial and maintenance also uh Fleet Maintenance has significantly risen uh that in the repair for third party cost parts and fuel uh software licensing that is a a big one that has come up too A lot of the our software is now going into the cloud and so transitioning from on premise or servers that are at the city to their um the software uh company's cloud is a significant expense that will be that is going throughout the forecast and then also things to consider is decisions on continuing arpa initiatives with ongoing general fund support though one of the expense pressures that we knew was coming um a couple of examples are the downtown Wi-Fi homeless support and the behavior of health so with that what I wanted to show you here in this chart was the total sources Trends so this is the revenues just for the general governmental fund and as we talked about and city manager Brady kind of mentioned we're also looking at different options in that we're discussing internally that we can present to council uh within the next month or two or more depending on how um the economy goes so what this does is shows one example of a trend so the solid line is our actual sources for the past 5 Years From uh fiscal year 1920 over to fiscal year 2324 so in that time frame we all know that we had uh the covid we had the the cares we had arpa things like that and then things uh revenues were coming in sales tax was coming in really good so we had a plus almost 11% annual growth so as of 2324 uh we're seeing that dip of -4% annual growth and that is due to as the co the revenue pressures I mentioned was the loss of residential rental the um the income tax flat tax and then just the slowing of the economy so we're seeing a a dip of the annual growth and then in 25 26 what we're looking at is hopefully growing out of that um with the economy coming back sales tax going up and we we're projecting about a 3 and 1 half 3.6% annual growth so the solid the darker lines are kind of what we're projecting the the light colored line is with residential rental tax so if we had residential rental tax that is the difference that light colored line is where we would be at so we would we wouldn't as drop as far but then we would start coming out of it a little bit more so that I just wanted to kind of show you that with the loss of residential rental we drop a little bit farther uh down than we would have with it so in comparison the next slide shows total uses Trends so in that same period of fiscal year 1920 through fiscal year 2324 we saw an annual growth and this is annual average growth of 12.4% in our expenses so in the previous slide our revenues increased by 10.7 our expenses increased by 12.4 so our our expenses increased more than our annual growth in Revenue now in the next same time period the next three years fiscal year 23 24 to fiscal year 25 26 we're seeing an average annual growth of plus 2.5% so in that previous slide we are at a NE -4% projecting a negative 4% Revenue so our expenses are increasing significantly than what our revenues are coming in and then in the outer years the last four years what we're looking at is kind a a modest growth in our uses of about 1.7% so in our revenues we're looking okay we're growing out of out of that the economy is coming back so our revenues are higher than our expenses so those are the kind of the trends I wanted to show you that our revenues in the previous five fiscal years were um not keeping up pace with our expenditures but now hopefully in the next um few years we' be able to grow out of it but we're also this does also include uh What uh city manager Brady indicated is the 2% uh exercise that we did in the budget last year but then also it includes a 2% uh reduction in expenditures for this coming up fiscal year which is included in the 2526 so putting that all together and this is one example also of some of the options that we're looking at so putting it all together the green line is our our re Vue our sources Trend the red line is our uses Trend and then the blue line now is our Reserve balances to to REM um remind the council our financial policy for the city council adopts our Revenue um our Reserve balance is 8 to 10% we like to stay within that in the in the fiscal year so if you notice the the dark blue line dashed that is with the dark red and the dark green what we are looking at in um our next year's for our forecast so around fiscal year 2829 we dropped below that 8 to 10% and that is because due to the pressures of the expenses that you see within fiscal year 25 all the way growing out but then also that significant Revenue dip that we're losing so the dashed line is an example of if um the Public Safety support consideration so for instance if we went back out to the voters and asked for a another 25 um 0.25% increase in public safety sales tax dedicated for that this would give one option to where if that came about and was considered around fiscal year 2728 we would then our revenues would exceed our expenses and we'd start growing that fund balance again and we would hover around where our principles are where we would like to be around that 15% we would now start growing back out and stay around that 20% so this is kind of one option that we're we're looking at we're talking with the with City management of with this are we lost the residential rental we are losing um portions of our income tax because the flat tax we have significant expense uh growth uh with the benchmarks and that does that is included in here those benchmarks and so trying to to figure out how to provide that service level but then also keeping as I said with the the comparison of keeping in that lower three to four cities of that being able to do that so mayor and Council what this tells us again this is a trend chart this is not like prophecy of actually what's going to happen it just it's a tool for us to understand what's ahead of us right when we do budgets we don't just try to solve for next year if all I needed to do was to tell you what their budget was for next year year this is a happy go-lucky conversation we're in a good shape but we don't do it that way we look out five years or more and say okay what is the trend what's going to impact us and so this tells us that we need to start making adjustments now we're not going to wait three four years from now because the the you know that you see what's happening in the trends what it tells us is we need to do a couple of things we need to continue to work very hard on flattening and reducing our expenses so we're in the middle of that right now in our conversations with departments and our conversation is this is not a one-year conversation this is a conversation you're probably going to be having for the next couple of years of continuing to tighten our belts look for more efficiencies very little growth in new programs if any and and really trying to find programs that maybe we need to scale back and and stay focused on some core um projects but it also suggests that we need to consider as we've seen some of our surrounding communities is how do we make up for the loss of 20 plus 20 plus million dollar in rental tax in the future and can we be focused on uh items such as Public Safety maybe streets or something like that so we are we're just showing you what that option might look like out into the future but we know first and foremost as a staff our priority right now is to really help bring that red dash line as far down as possible but Council it's you're going to hear that we will probably be recommending no new very new very little new programs in the coming budget and probably adjusting and um not filling vacancies on a lot of other areas and a lot of arpa programs that we've been able to stand up because of those funds probably won't continue into the future so those are the kinds of framework that we just want to give you the details we we you know I haven't I don't know that we've ever shown a forecast where we say man in year five we are just going to be rolling in the dough it never shows that right I mean 5 years ago we probably thought this year was going to be a disaster um but we just it helps remind us that we need to make work on you know different topics and maybe it's not a year to add a lot of new programs or services and so it kind of helps us guide us in that conversation so that's what this is It's a planning tool it's a forecast it's not a prophecy of actual you know it's just here's the best and you saw all the we load it up right we take the most conservative you which I think you want us to do but it does inform us that we do have some work to do over the next couple years well continue on I guess we have the utility part A quick question before we get into utilities did Mr Butler say or did you I apologize if I missed it is a 0.25 I don't know Cent or percent um is about to expire in he just suggesting it could be an option so it' be in additional okay so the the one we have in place is ongoing doesn't have an experation and perpetuity yes mayor um council member do this would be in addition to so right now the public safety sales tax is a 0 2% 0.25% say we doubled that to 0.5 dedicated just for Public Safety sales tax that's what this green line would do so right now that 0.25 brings uh collects about $30 million roughly annually so if we did another 0.25 so half a percent that would be about 60 million and then that's where that dashed green line is just as a consideration for uh future years of this could be one Phoenix is doing a half a percent of their just general city sales tax and that I believe is around just over $100 million that they're hoping to recoup and Gilbert is and Gilbert did a half a percent also and so now they were at 1.5 now they're at two they're equal same we're right now this is just putting it on the table for a conversation so and when does a state budget um be put to bed when it is it complet is do we expect any changes that will affect us because there's just so much right now I don't know do we have to brace ourselves for any unexpected changes that would alter our drill I didn't realize brand is here I'll defer to you you got it mayor and Council good morning um council member Duff that's a great question um the state budget does have to be complete by the end of the fiscal year June 30th and so um the the big conversations in regard to the state budget have not excuse me I ran in here um have not happened yet um there are a couple bills that we're watching closely that would have um some Financial impact we'll see I mean we're we're only halfway through the session so we'll see you know over time the state budget does or the um the the governor and the legislature do have to consider some um challenges that they're facing as well so I don't I don't have a number to present today but we are um monitoring closely so we will complete our budget process before they complete theirs no yes yes okay most likely we typically we're usually completed by May right so because they have their budget um challenges as well as any federal dollars that go from you know to the states um could be alter as well so mayor council member Duff that's correct um the last couple years we've seen that the state hasn't passed their budget until they till the very end of the fiscal year it is possible that they could um pass a budget sooner but it we're we're still in a in a wait and see what do we do if we pass our budget and there's some major change in which it creates taxs being taken away I don't know well I I'm afraid you know usually we have projected you know if they make a pass a policy we have one or two waiting years to adjust but in today's environment things are very immediate and so we just would have to go back and re come back to council and have a discussion yeah okay all right thanks so mayor and Council now we'll uh shift over to the utility um section of the forecast all right so I'll just uh briefly walk through the five principles similar to General governmental we have five principles on the Utility Fund side so balancing the net source and uses having a 20% or higher Reserve fund balance uh rate adjustments that are smooth and uh predictable and smooth throughout the forecast as we discussed earlier Equity between residential and non-resident residential rates and affordable utility services so just briefly on the utility operations each utility is operated as a separate Business Center uh that Reserve balance that we have in the fund can be used to smooth out rate adjustments and it can also be used to phase in new programs or changes in operations these are just some examples of significant capital projects um that are either in construction or um maybe starting soon so the the first three are the what we call the big three uh so the Central Mesa reuse pipeline the signal be water treatment plant expansion and the advanced metering infrastructure or what we we say Ami um the ReUse Pipeline and the Ami project are scheduled to be completed in 2027 and the treatment plan expansion uh we're expecting to be completed in 2028 the gansel road uh pipe expansion um so this is a gas pipeline uh and it's down in the magma surface area it's about 4 miles of install in 12in um gas pipes so that's going to uh allow for continued growth in the magma service area uh and provide redundancy as well the Broadway Road improvements with Transportation um this is just one project where uh when Transportation reviews their CIP for a street construction project uh they'll collaborate with the utilities and so the utilities will review that section of road that uh um that may be under construction and review do they need to do improvements Replacements upgrades to the infrastructure uh under under the street so this next Slide the these are some of the significant expense lines in the Utility Fund and we're just looking at the three-year growth rate so from fiscal 2021 through fiscal 23 24 and looking at the three-year increase um so we've seen a number of increases over different budget lines in the in the utilities so Fleet Maintenance and Repair over that three-year period is increased 61% this is going to be increased price of um Parts labor fuel that's all included in there um Solid Waste obviously is the biggest user of uh Fleet Maintenance and Repair Fleet Maintenance repair what percentage you culate that related to oh uh so for General governmental funds um it's about yeah within General governmental funds police and fires about 90% of the fleet expenses you see Fleet I jump I jumped back to the general government but it just reminded me sometimes you see that Fleet Maintenance repair what was the percentage again about 90 not here but in the general government it's related to Public Safety too so don't just think about that as white pickup trucks it's tahos and everything else I'm sorry I little squirrel moment there but I just is that is that due to supply chain and no it's just a it's just the cost right of those Vehicles the cost of repairs right um it's trying to get things out there as quickly as possible but it's just the cost of vehicle Main yes I mean A firet TRU is a very specific vehicle with right specific parts so they're they're going to be pretty expensive to repair it's just the increase in that cost it's not how much they are it's just the fact it keeps going up goes up and mayor and Council to that point too um when we see these percentages in these amounts and kind of what council member Brady was alluding to also is that the the cost never we promoted you you promoted sorry yes he's promoted to from city manager no not interested um what city manager Brady was mentioning was that the costs have not gone down so when people say inflation hey inflation is slow to 2 and a half 3% yes but that is on top of the cost that it is right now not what it is so these costs of say solid waste disposal of 9.3 million 11% or even the water commodity costs that are at 16 now the 3% is on top of that not so the costs still there and the expenses are still there and as I mentioned before as I showed you in the general governmental fund is that the costs have significantly gone up and the revenues aren't there but now we're at like a new base of that 3% growing and and I think our garbage truck repair costs have gone up considerably too because we weren't able to get new ones and the older ones are more expensive to maintain if I remember my budget correctly so on the fleet would it also include growth because we have additional some of some of it's not it's not a I mean yes it is included in there yeah um mayor council member Duff on the on the Utility side throughout this period we had such a difficult time getting new trucks that there really wasn't an increase in the amount of vehicles that we received within this time period for Public Safety I or for the general governmental fund which is mostly Public Safety I think we did receive some but within this time period it was very difficult to actually receive a new vehicle we had ordered them um but but now received them and it took about 3 years 3 to four years to get yes can I ask so the 90 sorry I have a mint in my mouth the 90% that a fleet is that also like um that's cost but the number of vehicles what would you say I mean is that significantly higher in public safety than the rest of the that we have a city vehic now we're separating General governmental from utilities a lot of the white truck you see going to be right if you just F ler number in general yeah we yeah compared to like a Parks Fleet or trying to think who else in the general government has a big Fleet Parks is one of the Bigg par the biggest but after that it's Public Safety okay right Parks yeah Parks right yeah and it um for General governmental over the three-year period the fleet costs increased 47% so just slightly lower than the 61 we've seen on the Utility side but a similar Trend uh next is solid waste disposal this is going to include um trash uh uh landfill charges um Recycling and green waste disposal uh the percentage here is a little bit lower at 11% compared to some of these other line items however um the contract for uh the these disposal contracts has been uh uh the new contract is in place in this fiscal year 2425 right now we're projecting those costs for 2425 to be 10.4 which is um 1.1 million over 2324 and then the F year implementation will be in 25 26 so we're expecting increases the next couple years due to that a water commodity cost um so pressure on Lake me and the um central Arizona project uh portion of the water that we get is responsible for for most of this increase uh chemicals at water and wastewater treatment plants so if if any body has a pool they've seen those cost increases um and then Valvista in the water treatment PL and the 91st Avenue Water Reclamation plant um the city of Mesa participates in a joint venture with the city of Phoenix on both of these so the City of Phoenix uh operates it and then they charge us for for our share um they've seen similar cost pressures with um chemicals power labor costs increasing and then on top of that these two plants are also older than like the brown Road water treatment plant or the signal but water treatment plant so they have additional life cycle and uh operations needs to make sure that those facilities are are modern so this just kind of puts together all of the operating uh expenses for each of the five major utilities from 2021 uh to 2425 so looking at the the Top Line there the green line is Wastewater um so the operating cost for Wastewater in uh for 2425 are projected to be 60% higher than what they were in 2021 um similarly we've seen increases for the others even the the lowest one there is natural gas still a 30% increase uh above where we were at 242 uh 2021 so we've seen you know cost pressures from various line items but it's affected all the utilities Mr thank you quick question um on that uh chart those those lines appear to be heading in a strong upward trajectory do you see them continuing in that trajectory after 2425 or are they going to flatten or do we have any way of knowing yeah through we're currently you know in the budget process and talking with departments you know we have seen the growth rate of inflation come down so it's not it it's kind of decelerating but still increasing and so we anticipate that the costs will still increase from 2425 but not as drastically as what we've seen during this period okay yeah I but I would caution that the future economic environment that we're in right now as a country is uncertain yes and a lot of these and I only mean that because a lot of these uh utilities rely upon big parts and repairs that could be affected by some of the new policies that are being implemented so we've got to we don't know but we got to see that we know some of these big parts do come from overseas and so we we have to watch and see what that means test well there could be some tariffs that impact know I'm not going to say we know today economically just something we rely upon those those pieces of equipment so so we're in a we're saying we're in a rapidly changing environment and it's going to take a while to really get it's hard for us to say we know but we're hoping it starts flattening out thank you so now looking at the total sources and uses for the Utility Fund we structured this similarly to the general governmental funds that that Brian talked about earlier so the red line is the uses or the expenses this include the operating uh costs as well as Debt Service and all related expenditures uh the green is going to be the revenues uh or the sources then the blue is the res are balance percentage so you can see in in 1920 and 2021 the green line was above the red so uh we're increasing the the fund balance um but then you can see the where the red line jumps up in 2122 that's when inflation really started impacting the utility operations and since then you can see the red line has been above uh the the green line so we've been drawing down the fund balance and you can see that with the decrease in the in the blue line what we're looking at again similar to General governmental is that expenses are um higher than than the revenues there is a catchup so in 28 29 we're projecting that um that they'll basically be equal as far as net sources and uses and then a slight increase in 2930 um so that's just kind of so there's a window here where we've got some challenges that we're trying to face we're working with the utilities on seeing what we can do to bend that red neck now down um and but it may mean but remember a lot of the big utilities like the water and wastewater Gas and Electric they're so dependent on Capital right it's it's just Capital intensive so that sometimes that's harder it's not just operational uh we're going to come back with some interesting ideas on solid waste and talk about our current model of delivery of services and if there's a way to maybe making some changes there so we're going to look at everything we can to kind of close that Gap over the next few years between the green and the red um you know we get to 28 29 we think we're in a better spot but we want to try to move that adjustment or that um difference a short or close it and get that green back on top so we have a little work to do it's not it's just more work to be done and we're we're just in the middle of it right I'm just meeting today with these folks on their budget so we're just giving you even before had a chance to see what they're proposing to make changes we don't have that included we are going to we still have a lot of work to do but we want to at least give you the framework of where we're starting from so thank you vice mayor oh after I I was just going to ask how do we anticipate the uh Blue Line utility revenue Reserve fund dipping this way impacting our bond ratings not it it's an explanation we have to give right we have to explain it well we always show them is historically again it's this being very conservative we will show them that 5 years ago this is what we thought was going to happen to the reserves and yet we were able to manage it and keep it at the goal so we've kind of go show historically we've never allowed the reserves to drop below whatever 15% or so um even though we may have had a forecast that said you know that year five years before that it was going to be a problem so it just it's just showing them that will manage this we will work our way to that but it just helps us understand we can't just be complacent and think oh let's just keep doing the things the way we're doing we will have to make some adjustments are we seeing these Reserve funds dip within the marketplace in other communities I do we know I'm not sure we have to take a look and see yeah I think mayor and and vice mayor Summers I think what's indicative is we're seeing a lot of rate increas inrees from other communities and so they're they're doing that to not allow their reserves to dip below yeah I mean we're we're raising ours too but I think we're using a lot of that capital for for the projects that are necessary particularly um water as we're expecting a capap cut significant capap cut what next year I think so we're pouring that into Capital while still also fonding for other projects so it's it's a little bit of a concern how low this is getting off in the next 3 4 years and yet we're doing at a very affordable rate compartive other homeowners you saw that's why we started off with that I'm not coming on saying we're going to solve this with rates we've got to do we got to look at every both sides we first want to work on the expense side and see what we can do to try to bend that number down and then we come back to council and say here's what we what we've done and what's the Gap and how long do you want to carry this down Trend we probably don't want to go as far as this graph shows but it does show that we will correct it we just like to do it sooner right and you know just from an essential essential Services piece there's no police fire there's no City without water so we have to make these Investments M I was just curious about the sources and the forecast are you assuming the continuation of that smooth adjustment rate each one we've shown in the past I think what sometimes we give you that we show the next 5 years so we don't change that okay here um I I don't remember exactly but it was still place on different ones and the commercial is a lot higher than the residential and all that's in there we can we'll have that when we come back on the race we'll have that conversation well let's talk about the calendar now what's what's next so yes thank you mayor the calendar what we're looking at is on April 3rd uh we'll uh we'll present the proposed manager proposed budget on April 3rd and then also April 3rd through April 24th will the Departments will come up and present their departmental budgets on May one the tenative budget will be reviewed um the wrapup on May one and then also non- utilities but then also added two new dates that I've asress there is that um the city will be having a city budget and finance uh community meeting um on May 7th that will be held at the Red Mountain tried to get two one on one side and one on the other so one will be at the Red Mountain rec center and then on May 14th we will also be doing one at the post so both sides of the the city can come and uh ask questions we'll have different tables and different topics of financial of either budget but also the act for and then also the transparency we'll have at those and um residents are more than welcome to come ask questions for that and then after that on May 19th uh the tenative budget will be considered for adoption by city council June 2nd then we'll do the final adoption and then also with the um secondary property tax then June 6 will be the property tax so mayor and Council mayor this you had asked us to be you know get out into the community as soon as we could with yeah thank you the budget so these are the two scheduled uh open houses I don't we Community engagement meetings so we'll have a lot of the the graphs and information you're seeing here and others that we'll have available and we'll have staff there to build questions and answer questions regarding the and we want to get to the point where we have a tentative budget so there there's something in the budget that they can be responding to good M no ladies first um I would just say you know we heard a couple weeks ago from a district 6 constituent about the community portion of it and the and the um emphasis on not being included in the process at the very end right I think that they it was felt that maybe that happened in the utility discussion not not I'm not saying I necessarily agree with that but um so how are we addressing that you know because you have four days and between the post and adoption is there room for any changes that might be brought up or the city council yeah the city council could make those suggestions yeah it's we can it's just that the council we're giving Council the month of April and the community can listen in on those right it's not exclusive right that's a very public process just like we're doing everything we're seeing today is available so when people say we don't have time it's like well it begins now right we put it out there um we'll have all the presentations from the Departments will be made available publicly of course for this uh meeting will be broadcast um and then on May 1st you'll receive the tenative a budget and review that so really from that point forward that's it's out there it's for an opportunity for them to make comment to provide feedback so we look at it as really having a whole month of May right to be able to do that so okay so our answer is tune in on Thursday morning yeah continue to watch every every week and especially in April in April every almost every meeting yes okay and on May 1st the the tenative full budget will be presented so at that point um have your questions ready I guess for right and we're just trying to find dates where we can actually go physically out there but community members can obviously through the social media can have lots of opportunities for them to engage mayor council member go forth uh we also are taking the idea from Mr Brady and Mr Butler on setting up an email address and an online form so that throughout the budget process we we can uh receive the comments and uh concerns from the citizens we'll be looking at that so they don't just have to come show up on the 7th and the 14 they can at any time submit those questions the the only thing I'm going to say and I don't know if we can fix it this year but I appreciate the two public meetings one at the post and one at uh Red Mountain uh but from the post to Red Mountain is 11 miles and from Red Mountain to my house is 12 so Southeast Maes is considerably farther than you think um so having a meeting down in that area for for the residents that live in that portion of the town would be appreciated I think I think to do that when you get your new library we can hold it there how about that I like the new library it's very nice yeah I think we all signed our names on that yes we did so yes mayor that's that's pretty much our presentation so I just if if there's no other questions I'll just conclude by you know those who are listening we're a full service util uh municipality we do everything and there's a cost to that and we're trying to look at efficiencies within each of our departments and that's what I appreciate because if we don't plan today we're going to be behind for tomorrow the next coming years and I don't want to do what other municipalities that have to do as far as Wastewater uh you know you know we'll have to go out to the public if we even consider a sales tax increase which we're not doing I want to be perfectly clear we're not doing that but we have to look for options in the future so I appreciate you bringing that all and I want our employees to know in the city that we stand behind you all the Departments you know we we understand there's some trying times until we get through this dip and figure out what's going on in the future so I appreciate your diligence with that so again we're looking at efficiencies within our in our city with that uh thank you Council anything else all right great well item two is to acknowledge the receipts of minutes do that Miss bilsbury and stuff thank you all in favor saying I I I motion passes uh summary of conent uh conferences and events attended by council do anybody want to you know we've had in and out all of us throughout this past week you want to go you're okay okay we're excus Mr Heredia I'll go real quick um on Tuesday I was able to speak to a group of students from asah high at the Family Resource Center at the M um main library and they're the students that are um studying early childhood development careers so that was really fun and then on Wednesday I got to go read to the first graders at Johnson Elementary I know you did the kindergarten nurse the day before me um for read Across America week which was super fun yeah and you were at something yesterday was yesterday the education Workforce around table oh yeah I mean we had our um our quarterly education Workforce Round Table meeting we got to introduce our new mayor there and hear him um talk about his priority for Education efforts in our city partnering with our great education Community um and that's always a great meeting yeah yourself and the chairman okay anyone else yeah can I oh I'm sorry I jumped in um on Tuesday I attended the ASU smart region Summit and um it was really it's an all day event in downtown Phoenix it was amazing I went last year and kind of learned a little bit about digital twins but it seems like this year Legion leading into digital Twins and Ai and how it applies to cities as well as businesses is really taken off significantly um they're using digital twins for efficiency and scenario um modeling and U moving from a databased knowledge to intelligence predictive knowledge um and moving from Roi to an Roe experential and efficiency measurements um because the intelligence the AI can anticipate and predict where we are are in a more comprehensive manner than just looking at Pass based um scenarios and even in public safety it was amazing how they could have a a incident live for all parties that are involved in it and they can see where they are they could already have the area cordoned up before they arrive it's just so the real time think on Public Safety is just tremendous and then also using that in training scenarios where they recreate um the um the event um and economic development using it for site selections for cities to visit your city and see different elements of it um it's just vast and um I look forward to learning how we can use some of these elements to increase our efficiency in Mesa thanks thank you council member I one um uh I attended the celebration over at Boeing they delivered their 50th um remand Apache e model to the British army so that was uh an exciting day for them uh we're happy that they manufactur and the Apache uh which continues to be the the war fighter of the sky uh in the world so uh glad that they do that here in Mesa great they package those over at Sky Harbor it's kind of fun to watch that how they get it ready to ship over okay uh Mr Brady what yes we'll see you next Thursday March 13th for our study session thank you okay all right entertain motion to move I've heard it okay all in favor say I I there was a second by Miss spillsbury by the way she do [Music]