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BUDGET OVERVIEW

good. These numbers have continued to trend down. Over the past several years it has
become apparent that we are not able to keep up with the decline of the major city streets with
the Preventive Street Maintenance program. Although this program helps with the major streets,
the biggest impact is to residential streets because they are smaller and more can be improved
with the available funding. In regards to streets the size of Glenview Drive, Meadow Lakes Drive
and Iron Horse Boulevard the funding for the preventive maintenance program would only be
enough to complete one or two of them. A major bond program is needed in order to fund the
street projects needed. It has also become apparent that more resources need to be put
towards preventive street maintenance. Staff are recommending additional funding be approved
for the preventive maintenance program.

As mentioned during the Capital Projects Budget Work Session, the drainage infrastructure is
also in need of maintenance. There are several millions of dollars of unfunded drainage needs
that have already been identified by staff. Staff will be proposing a funding option and plan to
address some of the drainage needs.

There is not an easy solution for aging infrastructure. It is a challenge that cities are facing at a
nationwide level. Various studies are done regularly showing the decline of the public
infrastructure across the United States, and it is clear that each city is going to be responsible to
repair and replace its own infrastructure. This issue will continue to have an impact on future
budgets.

Impact of Escalating Personnel Costs

Personnel costs are the biggest expense in the budget, as people are the City’s greatest
resource in delivering quality local services. Salaries and benefits are important in retaining and
recruiting the best people to perform the quality of work required to deliver effective public safety
services, street and utility work, parks and recreation amenities, financial management, property
maintenance, safe and high quality new development. Health insurance costs continue to
increase, and providing salary increases to keep pay competitive to the market is becoming
more of a challenge as we face diminishing revenues including restrictions on local control to
raise revenue. Revenue “caps” that further restrict revenues from property tax will exacerbate
this issue. With the transition of retail sales to more and more online sales, sales at brick and
mortar stores are suffering which is further diminishing revenues from sales tax. We do not see
the type of growth in sales tax when we add new stores as we did 5 or 10 years ago, and we will
likely see more major retailers close their doors in the future. Our best strategy is to look at ways
to control costs, particularly in the area of health insurance. This year we anticipate
implementing increases in premiums as well as changes in our health plan to further control
costs. This will include changes in eligibility and costs to the health care plan the City offers to
retirees. It is necessary to begin to address this now before increasing health insurance costs
begin to impact the City’s ability to provide services including our ability to maintain competitive
salaries and benefits for employees.

Future Retail Sales & Sales Tax Base

Maintaining and growing sales tax revenues will continue to be clouded. Pressure continues on
the brick and mortar sales tax base amid increases in online sales (which do not necessarily
translate 100% into local sales tax revenue) while placing additional pressures on the stability
and profitability of the existing retail commercial property tax base. For example, Amazon’s
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