City staff presented a proposed multi-fund budget at a council workshop and outlined increases driven by new industrial water users, personnel costs and recent debt issuance, while councilmembers discussed whether to keep the tax rate at the staff-projected level just under 51 cents per $100 of assessed value or raise it to create a cushion.

The budget presentation, led by Craig, a city staff member, showed total proposed revenues across all funds of about $25.7 million and total proposed expenditures of about $25.0 million, leaving a modest positive net position. Craig said personnel costs in the general fund include a 2.5% salary adjustment and highlighted that technology, maintenance and certain capital purchases moved spending between categories rather than creating large new programs. "So we started taking out some of that overage and putting it towards projects," Craig said, describing how prior rate increases produced reserves used for one-time projects.

Why this matters: the council must set a tax rate that funds operations, maintains reserves and responds to recent increases in utility system demand. Staff told the council that projected new production from two large industrial customers (identified in the presentation as MFS and Walmart) increases water demand and operating costs and could require wastewater capacity expansion and later commercial wastewater rate adjustments if daily capacity limits are reached.

Key details from the presentation and discussion

- Utilities and industrial customers: Staff incorporated projected water and wastewater volumes for incoming industrial production and said utility expenses are rising in part because the plant will treat more water. Craig said the utility fund was projected to finish the year with a reserve equivalent to about 283 days of operating expenditures. He warned that increased commercial and industrial usage will require future planning for wastewater capacity and likely design and construction of expansions.

- Debt and capital: The presentation noted an increase in tax-supported debt service connected to a recent debt issuance. Craig told the council the city increased tax-supported debt paid by property taxes to about $41,850,000. Capital spending overall declined from the prior year because large purchases and lease purchases (notably police vehicles purchased or leased previously) were completed last year, but the new budget includes five new police vehicles (four patrol vehicles to replace older Tahoes) and other utility equipment purchases.

- Personnel and operating pressures: The general fund includes a 2.5% salary adjustment. Staff said maintenance, chemicals and other operating costs in the utility fund are rising because production will increase when the large industrial users reach full operation. Craig noted supply and inflationary pressures will likely continue for several years.

- Tax rate and fund-balance cushion: Staff printed a tax-rate projection (described in the presentation as just under 51 cents). Councilmembers discussed leaving the rate at that staff-projected level versus raising it slightly to create a cushion for contingencies. Council members observed that each one-cent change in the rate brings roughly $150,000 in revenue and that the council had a modest amount of additional revenue available (staff noted a little over $15,000 of immediate wiggle room in one scenario). Several councilmembers voiced concern about raising the rate substantially above the printed figure, saying a larger increase could erode public trust after the council had previously publicized a lower figure.

- Use of fund balance and next steps: Council members discussed using fund balance to smooth short-term needs rather than raising the tax rate further. Staff and council agreed to publish the required notices and to hold public hearings on the tax rate; the workshop discussion identified hearing dates (the transcript references a first hearing availability on the 19th and a subsequent meeting on the 26th). No formal rate adoption or vote occurred during the workshop.

Discussion versus decision

- Discussion: Staff presented detailed fund-by-fund numbers, explained drivers of revenue and expense changes (personnel, technology, debt service, industrial water demand), and answered council questions about specific line items (police vehicles, utility capital, hotel/motel and special funds). Council debated street-maintenance funding levels, staffing needs for public works, and a request from the local chamber for a modest contribution to an economic-development campaign.

- Direction/assignment: Council asked staff to publish notice and prepare for the formal tax-rate hearings and to provide follow-up details on potential impacts (for example, staff was asked to clarify where additional money would be spent if the council chose to increase the rate).

- Formal action: None. The transcript records no motion or formal vote on the budget or tax rate during this workshop.

Ending

Councilmembers left the workshop with staff direction to post required notices and return to council for the scheduled public hearings. Staff emphasized that decisions about future utility capacity, commercial wastewater rates and potential staffing additions will require further study and likely future agenda items.